Let's start buying stocks! Step 1: Research the Stock

The first thing to do before purchasing a stock is to research it. Make sure you know what your buying in to and if it is a real good idea after all.

Before you start researching your stock you have to find the company that catches your eye, or the company that all your friends buy their clothes from. It could be anything. You can also find companies through services such as Yahoo Finance and Google Finance, you can browse through companies with filters, look for articles etc. Your individual broker may offer other services such as Stock Ratings, and "Research" Tools.

Now that you have your company you need to make sure that it is a "sturdy" company, and you need to double check that it will eventually make you some money.

Let's now take for an example, Google, or NASDAQ:GOOG.

Some things to check....

Is it Financially Ok? Is Google making money?

You can go to www.morningstar.com and search the ticker (=GOOG) scroll down and find the Financial Health grade, below it is an A that is very good, stick with A through C's.

Does Google, GOOG, have enough trading going on? Check out the Avg Vol (Average Volume), make sure it is above 100,000 that is a great number to stick with! Look below (Highlighted, on Google Finance), a good 3.0 Million or so.

Check out what it's growth grade is, stick with A's and B's. This is on www.morningstar.com again.

Look to see if analyst's think it is a good idea to buy into... This is on finance.yahoo.com. Click on Analyst Opinion....

Once that opens, make sure that it is somewhere in 1.0 through 2.5 or so.

Check the P/S Ratios. Make sure that they are somewhere between 3.0 and 5.0. This is done to make sure that you will get some growth sometime, again no guarantees, but very probable!

GOOG is above that this means that it is "momentum" priced. If you are going to buy into GOOG, make sure that you have a strong market.

Last but not least, make sure that you company is making money for you, this is priced per share. Make sure that it is positive NOT NEGATIVE!

Now. Should you buy it or scrap the idea?

Google passed all the tests except the P/S one. Do we have a strong market as of this post? In my opinion no, yours? There will be always some-kind of risk involved in buying stocks, always.

Personally, I would buy into GOOG, it might make me some money in the future. What about you? It's your decision.

I would not recommend buying a stock if the failed more than one of these so called "tests".

Have fun! And if you feel like contributing your two cents click on a link below! 

One more thing before you start trading.... The Markets!

There are 4 MAIN different types of Markets.

These are were stocks are traded and when bunched up together they creat averages... Ever heard of "The Nasdaq lost 10 points today" etc. on the news?


These include:

The NASDAQ, this is a big computer system that has no real traders in "red" jackets involved... Most of the Technology stocks are traded on this system.

The Dow Jones, this is where most big industries and manufactures are traded.

The NYSE, New York Stock Exchange, this is where big corporations are traded. These are the real guys in the red jackets!

The S&P 500, this is where 500 of the biggest and most stable companies are added together, if this goes down it is not good at all!

Those are the main markets.

Have Fun!