Basics of Successful Equity Investing

By Christopher Fitch

With economic data getting better every day (or at least less dreary), now might make the most sense to start investing in the equity markets. By following these basic strategies, you can improve your probability for success.

1. What is the Price-to-Earnings Ratio for the security in question? Finding out what the PE ratio for a security is allows investors to determine how much revenue each dollar they invest generates for the company. Obviously, the lower the PE ratio, the cheaper the stock price. This ratio can be used to determine how expensive a stock price is relative to comparable securities.

2. What is the Debt-to-Equity ratio? The debt-to-equity ratio tells investors how much debt the company holds for every dollar in equity. The higher the debt-to-equity ratio, the more debt the company has, and this can be problematic. Understanding where comparable securities stands with their debt-to-equity ratio can help investors determine whether their security is better positioned to survive leaner times than its competitors.

3. Know what Analysts say about the security. Most publicly traded securities will be reviewed and rated by companies that trade in that security. Recommendations in the form of a Buy, Hold, or Sell recommendation are often made. Understanding what professional analysts think about the security can help confirm or refute an investor's independent research on a security.

While the above three tips are nothing close to being exhaustive, they do provide equity investors with a starting point when evaluating potential trades.

For investors who would rather not deal with the research aspect of investing, mutual funds provide a great alternative as the research and effort is done by the fund company. - 23162

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At MutualFundSite.org, investors can learn more about the importance of Tactical Asset Allocation as well as the best way to Invest 10,000