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Thought Process On Picking Your First Stock (Guest Post)

Thought Process On Picking Your First Stock (Guest Post)

I’ve had countless queries in the past and a couple of emails recently from readers who are interested to start investing and one of the commonly asked questions is ways to pick the correct stock to invest. The first stock purchase for an investor is always intriguing.

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This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with username known as 3Fs and has 2169  followers.

The emotions when you first purchase your stock are filled with mystery, excitement, fear and then there’s always the risk and reward. Many will soon get addicted to it and then will proceed with the next second and third purchase and so on.

It’s incredibly difficult to answer this short question to any investors who are asking as there’s legitimately no right or wrong answer. Nevertheless, I’ll try to provide some framework guidance which hopefully can be productive and useful to any investors who’s starting to venture out on their own.

Step 1: Organize a list of companies in your respective region that are big market cap
Your very first step as a beginner should always be looking at the bigger market cap in your respective region. This means looking at the likes of blue chip companies such as Singtel, DBS, OCBC, Sembcorp and SIA in your STI index if you are looking at the Singapore market. In the US market, you will get a list of acquainted well-known companies such as Apple, Boeing, Facebook, Starbucks, Visa and many more.

Don’t buy them yet at this point because there’s many rotten apples hidden in the fundamental of these companies, even for blue chips.

At this point, all you want to do is to get a grasp understanding of:

  • What is their business model?
  • What products do they sell?
  • What competitive advantage do they have over their competitors?
  • How much market share have they acquired?
  • Management capability and their historical financial performance

Most, if not all of these information, are easily available in the annual reports or financial statement of the company where typically management would provide operational quantitative updates on how they are doing or coping with the situation.

All you really need to do at this point is just to spend some time gathering the information and writing some notes down and that’s it. No action should be taken yet at this point because the information you have is public, which means anyone else will have the same information as you do so that’s not really helping you to gain any advantage.

You may also want to segregate the list of companies that are appearing in your newsfeed or newspaper because not all the time they are good. The fact that you read in the newspapers that people are queueing up at McDonald’s does not immediately qualify them to be a good stock.

Always be selective when reading and takes information with a pinch of salt. This way, you will have more questions than answers which is good because it leads you to explore more on your questions.

Step 2: Areas of Competency
Your areas of competency is your competitive advantage over the next other person that you have a lead on.

This lead can be achieved through years of working in the industry and getting to know-how the inside operations of how certain things might work in detail. For example, if you are in procurement, you would know how aggressive your competitors are pricing in their bids for the tender or if you are working in supply chain logistics company, you would better understand the details on transit times, delivery performance, freight claims and customs requirement.

Thus, when you select companies that are in your areas of competency, you are able to value-add your experience to the companies you are prospecting and make better informed decisions from there.

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The Beginner’s Guide to Analysing Financial Statements – Cash Flow Statement

The Beginner’s Guide to Analysing Financial Statements – Cash Flow Statement

This post is entirely contributed by our veteran community member, Tam Ging Wien, author of REITs to Riches: Everything You Need to Know About Investing Profitably in REITs

This article was first published on ProButterfly.com and also on InvestingNote on 03-Apr-2018.

cash-flow-statement

We decided contribute to the InvestingNote community with an educational piece to demystify the 3 financial statements.

When we read we begin with A…B…C…, when we sing we begin with Do… Re…Me…

That at least how the song lyrics go.

But when we want to understand and assess the financials of a stock, we need to begin with the 3 financial statements, namely:

In our last “The Beginner’s Guide to…” series, we covered the The Beginner’s Guide to Understanding The 3 Financial Statements.

After having an understand of the 3 financial statements, we continue the series with analysing these financial statements in order to understand the financial health of a company. In this post, we will be learning how to analyse the Income Statement.

Do read the previous articles first before continuing as it will give you a firm foundation of the 3 core financial statements.

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Top 5 websites for doing your own stock analysis in Singapore

Top 5 websites for doing your own stock analysis in Singapore

successful trader with free data

Investing or trading stocks can be an intimidating thing especially for beginners.

While the idea of making a profit by merely clicking a few buttons is definitely alluring, but the idea losing money after clicking a few buttons can make even the most experienced traders think more than twice, let alone beginners.

What essentially makes investing different from gambling is the rigorous stock analysis that happens behind the scenes.

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