How to analyze the purchase of share in the Stock Market

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I have received several questions and comments related to the investments in stock market for beginners. This is a general guide; it is not complex because this topic is very technical. But, with this information, you can begin to understand the process to make a decision about the purchase of share.

Direct investments in the stock market can be advantageous when they are made in the long term. They are good to create a fund for retirement, for example. When you buy shares of a company you become a partial owner of this. If the company is successful, you as an investor will enjoy the profits. It is also possible to invest in groups of shares, such as mutual or common funds. But, you can consider investing directly in stock options after understanding them.

Technical analysis and fundamental analysis to purchase of share

There are two main ways to analyze an action, technical analysis and fundamental analysis. The technician tries to make a forecast of the price in the future based on the prices of the past. The fundamental analysis uses income, expenses, growth in the future, etc. to determine the value of the company and its actions.

How do you know if an action is good or bad to consider your purchase of share?

Here are some of the features you should review:


The current price is one of the most important things to consider. This price determines the amount of the share you can buy with the money you have to invest. The price is analyzed in context at historical prices. Check the prices of the past and compare to the current price to determine if it is good to pay it now.

Revenue growth

The value or price of the stock will only increase if the company grows. So you check the income compared to the income of the past and analyze its trends. A tendency to increase from year to year or from quarter to quarter is a good indication for example. If the income is not increasing, but in low or flat you should investigate why.

Earnings per share

The profit for each distributed share is an indicator that causes a lot of debate. Some investors give importance and others do not. For example, the companies in the technology sector, many times this indicator is negative because there are no profits yet. Generally, the higher the gain per share the more value the company has and consequently the action.

The Dividends

Many companies distribute part of their earnings in the form of dividends. Investors seeking dividend income should pay attention to the dividend rate and what is the percentage for each share. The part of the income that is not distributed to the shareholders is re-invested in the company.

If your purchase of share is to earn dividends be sure to check the trends of the rate; to lowered, uploaded or stayed the same. For success in stock investment, you can check the website is very informative for analyzing companies and their dividends.

Not all good companies distribute profits in dividends. Many of these re-invest the money again in the business. The lack of dividends is not a reason not to invest in an action unless you are looking for dividend payments.

Market capitalization

Capitalization is simply the total value of all public (distributed) shares. Companies with large capitalization, such as Coca Cola, Disney, Walmart are less risky than smaller ones. But at the same time, they offer less growth because they are already mature. Most of them offer dividend payments as well.

Analysis of the experts

It is important to read the reports of the experts but to keep in mind that disagreements exist between these experts. For this reason, you should read more than one report before the purchase of share. You can find the diverse opinions in your stock exchange company.

The industry

It is important not only to study the action but also the industry in which the company participates. Some industries are in decline or have problems with the environment, these are difficult to grow or have good profits. These factors influence the future value of the shares.

These are some of the factors that you must analyze before buying an action. This is a fundamental analysis. Also, you can do or study a technical analysis done by an expert, especially if you are going to invest in the short term. There are never guarantees with the stock market, but you can educate yourself to purchase of share.