Stock Market Investors » Stock Market Investing Advices and Tips » Avoiding Bad Stock

Avoiding Bad Stock

Most investors often fall in the simple trap of believing someone who tells them that a particular stock represents the next winning bet. However, you should be very cautious when examining the possibility of investing in such a "promising" stock.

An example of a great looking stock is the one that looks absolutely healthy from the outside, but it is usually hollow and unprofitable in its core. Most investors that are attracted by these shiny stocks eventually find out that the companies that have issued them are not profitable and financially sustainable. These stocks are easily forgotten after a short period of time.

Another example of a bad stock is the one that is tied to the cycles of the business. This means that its price is very vulnerable to the changing cycles of the market. If you purchase the stock at a time when its price was high (due to high demand), you will soon end up with a worthless stock because of the changed cycle of the market.

Sometimes a stock may be really very profitable and a viable investment. However, you have entered the game too late at a point where the market has increased the price of the stock to a high level. No matter how good the stock may be if you buy high you will soon feel the losses.

Making the Right Investment Decision

In order to make a successful investment decision you should first of all select a company that has a reliable business. Additionally, the company should prove that it has good prospects for success in terms of growth.

Second, you should be able to find a price that coincides with the current state of the company and its future position. You should make a reasonable evaluation in order to avoid paying more than the company is really worth.

In order to determine the current and future value of the company's stock, you can refer to one or several of the many formulas for this purpose. However, you should not fully rely on them and try to develop your common sense feelings in order to pick the stocks that best meet your financial goals.

When you start the stock selection process take your time. Don't be too impatient and if a stock doesn't look very viable don't invest in it. There are plenty of other opportunities in which you can invest your hard-earned money. Analyze all the alternative investments and select the one that best meets your needs and goals.

Remember that you should try to avoid the described above bad stocks, which only look profitable but are financially hollow. Additionally, the best way not to lose your money is to invest reasonably and cautiously by analyzing every opportunity before jumping into it.

To be a successful investor you'll need the right trading platform. A professional-grade, award-winning platform that offers low cost trades like OptionHouse. The low cost trades will allow you to preserve more of your wealth and save money, which you can reinvest instead of paying brokerage commissions.
Opening a OptionsHouse account to benefit from their low $3.95 stock trades (currently they offer 100 free trades) is a smart idea.
Article Tools
Rate this article : Low
  • Currently 2.8/5 Stars
  • 1
  • 2
  • 3
  • 4
  • 5
Bookmark this page (CTRL+D) :