How to improve the returns on investment in stocks?
Poor stock performance may not be the main cause of damage to the investment portfolio. Rather, what the investor does after buying the shares, here are some tips to improve returns on investment.
The investor is usually better at making buying decisions, but he is not lucky when he wants to sell the shares bought. For example, he sells after a short period of the buying process and then loses a percentage of the expected profits, or sells after a long period, which allows the losing stock or poor performance to double its loss, or the sale decision is too late for it, after the stock has made large profits, it is Landing.
Therefore, the poor performance of the purchased shares may not be the main cause of damage to the investment portfolio, but rather what the investor does after buying the shares.
Tips for improving returns on equity investment
Avoid borrowing in order to grow your investments in the stock market, because if you achieve a loss you will have to pay the borrowed amount along with the fees and benefits of borrowing for something.
Start saving as soon as possible, saving as much money as you can, and getting the highest possible return in line with your financial strategy.
Be well aware of the degree of risk you accept, in order to benefit from the appropriate investments with it and to achieve the highest possible return.
Learn the basics of trading the stock market and understand the terminology used, before making the first investment.
Make your investment portfolio distinguished and diversified in one area, as the diversity of the investment portfolio is considered the best way to manage investment risks.
Make entry into any deals or investments for compelling reasons and good reviews in addition to technical analysis for them.
Remember that the growth of your portfolio depends on three interrelated factors: invested capital, amount of net realized annual profit, and the number of years or period of your investment.
Focusing more on the selling stage and with adjusting the strategy of buying and selling stocks at some point according to a pre-investment plan and rules.
Review and evaluate your investment strategy periodically and amend it if necessary.
The use of some financial indicators to identify the appropriate companies for investment, some traders in the financial markets may make serious mistakes when choosing the right company for investment, and choose shares that are overrated.
Comparing the financial indicators of the company to be invested with with the same companies operating in the same sector, it is not possible to compare a cement company with a retail company, as each sector has its specificity.
The most important financial indicators that help you to evaluate the performance of stocks
Here are some of the most important financial indicators available in the financial statements of companies, or you can get them from specialized sources in the field of companies ’equity analysis. You can also extract them yourself with more effort.
gross profit margin
Gross profit / sales =
A decrease in this percentage means a decrease in profits due to the increase in the costs of materials or salaries, while its increase indicates the company’s ability to generate profits. The higher the percentage (gross profit margin), this indicates the efficiency of operating management.
Net profit margin
Net profit / sales =
The company means the remaining of all sales riyals as profits after paying all costs of the activity, as this high percentage indicates the efficiency of the company’s management to control sales.
Earning per share
Net profit / number of shares =
The higher the return, the better it will be for the shareholders, and it will be compared annually to ensure the company’s business growth, as this indicates the company’s ability to distribute continuously. This return is compared with similar companies in the same sector to choose the best.
The investments in the stock market have achieved great returns compared to other types of investments, in addition to the advantage of easily liquidating these investments. But this type of investment requires more time and experience, and with appropriate risk management, in order for this type of investment to be effective and contribute to building your wealth.