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Stock Market Basics for Dummies (Part II)

Before kick-starting the stock market investing journey, Piggy recommends that you first of all state your financial objectives and know your risk-tolerance level. By doing this type of homework, you can determine which categories of financial assets you may want to consider investing in.  Shares are generally considered risky assets given that share prices can go up and down as a result of a number of factors. In addition, when you have considered investing in shares, there is also a need to appreciate the type of companies that you would want to invest in. As highlighted in our article entitled, “Stock Market Basics for Dummies (Part I)”, the basic principle to profit on the stock market is to BUY low and SELL high.

The process of analysing investment prospects includes examining groups of securities. For this task, you need information to forecast the timing and amount of future cash flows of investment candidates. That is the price you pay today is based on the future income of the asset. Figuring out what the asset will be worth in the future requires some homework and analysis. Here are a few examples of sources for this type of information:

  • Company annual reports often assist in forecasting the company’s future revenues and earnings;
  • Company websites – These provide profiles that describe a firm’s organization, products, financial position, chief competitors and executive management

  • Investing electronic magazines and websites such as Investopedia – these provide educational articles and pertinent facts for beginning and experienced investors;
  • Databases provide news, market commentary, historical stock prices, economic forecasts, industry standards and competitor information;
  • Earnings estimates from brokers and analysts give you forecasts of a company’s future earnings;
  • Industry or business-sector news can frequently indicate whether an industry is in a downward cycle;
  • National economic data (national budgets and monetary policy statements) can point you toward a particular investment strategy. For example, if the country is going into a recession, you may want to select stocks that provide you with some defense;
  • News channels also offer breaking news that can help you judge whether your stock purchase is a winner or a loser;
  • Securities and Exchange Commission (SEC) and Zimbabwe Stock exchange (ZSE) filings provide you with financial statements from publicly traded companies;
  • Newsgroups and social trading groups such as those developed by are informal, online groups of individuals who share their ideas about a common interest (Contact +263 78 358 4745 to join a WhatsApp Social Trading Group); and
  • Stock recommendations from professional analysts enable you to find out what brokers and analysts are saying about your investment selections.

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