Question

what are factors to scout for when investing in short term stocks? What is the most effective method when looking to maximize profits when investing in stocks? provide an explanation.

Answer 1

1) The factors to scout for when investing is short term stocks is as follows

a) General Direction of the Market. - Short Term and Medium Term trend

b) Earnings growth of the company- Is it growing high relative to other companies in the industry

c) Credibility of the Management

d) Strength of the Company in the Industry

e) P/E Ratio - A low

f) Leverage

d) Current Trends in the Relative Industry

2) The most effective method when looking to maximise profits when investing in stock is to make a summary of the Company in terms of the above factors.Once the stock is assessed based on above criteria, an informed decision needs to be made. This takes care of the fundamental of stock picking. However the timing of the investing in stock is equally important.It is important to buy a stock cheap and sell when they are over valued. The most effective way is to buy when stocks are battered during an economic downturn, though the long term fundamentals of the company are intact and sell them when the price is overvalued and the economy is in full upswing. This situation allows investor to capture maximum value.