THOUGHT OF THE WEEK
How to Analyze a Stock before Investing.
Stock is one major asset class for investors who seek to grow their investment. Investors rely on several sources for information before making a decision to buy a particular stock. Investment advisors provide investors with market research to aid in making decision in stock selection. It is important however as an investor or potential investor to undertake basic analysis of the stock recommendations from your investment advisors.
The aim of stock analysis is to determine which equity to buy and at what price. The first step in the process is grouping the stocks based industry or sector. Listed stock on the Ghana Stock Exchange can be grouped into banking, pharmaceutical, manufacturing, and telecommunication industries among others. In selecting a particular industry, the performance of the industry must be considered.
In selecting a particular stock from an industry, it is critical to employ both qualitative and quantitative analysis. Some of the quantitative analysis includes reviewing the financial statements and annual reports to establish a trend in the performance of the company over a period. Comparing financial statements of companies within the same industry gives a clearer picture. Some qualitative analysis which can be performed includes corporate governance and quality of management, brand identity and business models.
It is the goal of every investor to make profit from the stock market. In order to be successful, investors must be able to conduct basic analysis on the stock market. This will ensure you are able to critically examine recommendations from your investment advisor.