Learning how to research stocks is a lot like researching anything else you might buy: learn the basics and then narrow down your options. Once you understand the basics of how stocks work, you can find the information you need to start investing in stocks that align with your investment goals.
While there are plenty of ways to research stocks, finding a method that works for you can pay serious dividends. Not only could you minimize your risk. You may also earn higher returns, too. Using our five-step process, you’ll have a process to guide all your future stock research needs.
Stock analysis is all about how experts look into how a company operates and makes money. Wall Street analysts spend their days pouring over company financials and other market data to predict how a particular stock might perform. The two main ways analysts analyze that data are:
To set a baseline, we’ll focus on fundamental analysis for the rest of this article, as it’s the type typically used for long-term investments. However, those focused on short-term trading tend to employ technical analysis more.
Every publicly traded company must regularly share certain information with the public. Lucky for you, you can then use this information to find companies that align with your investment interests.
To find these reports, you can start with a company’s website. Many have dedicated “investor relations” pages where you’ll find their latest and historical filings. You also can search the Securities and Exchange Commission’s (SEC) filing database, EDGAR, if you have difficulty finding the reports in other places.
Some of the most helpful reports for stock research include:
Once you find the above forms, you’ll need to locate the necessary information. For example, to evaluate a company, you’ll likely want to explore:
While these aren’t the only factors you can use to measure a company’s potential for financial success, they’re an excellent place to start. And remember — a single number can’t determine a company’s true worth or value. Your best bet is to consider multiple factors before deciding that one stock out of the whole stock market is the right one for you.
Advice comes in many forms, and likely a few you wouldn’t consider being “advice.” But a key part of researching stocks is listening to what experts say — especially since it’s their job to look at every part of a company. Some of the ways you can access expert advice are:
In addition to understanding a company’s financial statements, you should also understand how it works. For example, how does it make money? Who are its customers? In which countries does it operate? These are all important questions your stock research should answer.
It’s also important to look at the basics of the industry the company operates in and how the company fits into it. Is it an established giant or a young company trying something new? Are there regulatory issues the industry must overcome? Finally, consider how the company will fit into the industry’s future. Will it be able to adapt to change, or will it fall behind its peers? Does it have any competitive advantages?
While a company’s financials are essential when researching stocks, so is qualitative research, a less quantifiable evaluation of a company’s caliber. In qualitative research, you’ll explore areas like:
Without a doubt, learning how to research stocks has plenty of moving parts. But with a bit of practice, you’ll find a streamlined system that gives you the confidence to buy stocks that meet your standards.
There’s no one “best stock” that will suit all investors. To find the best stock to buy today, we recommend that you identify your investing goals and risk tolerance and research several potential stock before making an investment. If you have an online brokerage account, you can use stock screeners to help narrow down your choices.
Finding stocks to invest in comes down to personal preference and a bit of research. One of the best ways to find stocks to invest in is by using an online broker’s stock screening tools. These interfaces can help you sort individual stocks by industry, growth potential, earnings, historical returns and more. You can also look for stock analyst reports that can offer some expert insights for your decision-making process.
You can learn how to analyze a stock using a wide range of online learning tools. LinkedIn Learning is a fantastic place to find low-cost access to courses about stock analysis and research methods.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.