Stock Investing Basics Tips

It is important to understand the basics and fundamentals of investing if you want to increase your chances of success and avoid losing money in the stock market. Investment basics like dividend yield and the Price to Earnings (P/E or PER) ratio are powerful tools to enhance your stock analysis.

The Dividend Yield is a financial ratio that tells you what percentage a company pays out to its shareholders in the form of dividends. It is calculated by dividing the dividends per share by the market price per share, and can be used to compare the relative attractiveness of dividend-paying stocks. Generally, stocks with high dividend yields are considered a good buy among investors.

The P/E ratio is used for measuring market performance and can be derived by dividing the market price per share by the company's earnings per share (EPS). You should compare P/E ratio among different stocks in the same industry in order to find the best deal for your investment. In general, the lower the P/E ratio, the more attractive the stock.

There are two main ways you can trade stocks. First is through a full service brokerage that assists you in determining which stocks to buy and when to sell. They offer services that cover many different aspects of the trading process, but they are typically more expensive than discount brokers. Alternatively, you can find a reputable online discount broker to help you buy and sell securities on a stock exchange. A discount brokerage firm usually charges clients significantly lower fees or commission, but the disadvantage is that the clients may not have access to much information about investing.

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