Choosing to invest in stocks is similar to buying a piece of a company. Below is a checklist that I personally go through before investing in a company. This is based on 3 years only on investing but hopefully it will be helpful to you.
- Choose a trust-worthy broker. Ideally go to the bank that you currently have your account at and ask them if they have a department to help you buy stocks from the popular exchanges. The commission rates will usually be on the first purchase only.
- Invest over a long period of time and do not invest all your money at the same time. Investing smaller amounts over long period of times provides you with an additional layer of safety against crashes like the recent Covid-19 related crash. My recommendation is to invest at least over 5 years.
- Never Short any stock. This is one potential way you can be losing more money than what you have invested.
- Don’t use leverage. If ever you decide to use leverage please use a take profit and a stop loss with a ratio of 3:1 and make sure that the stop loss risks only 1% of your total account.
- Know the domain in which you are investing. For example if you decide to invest in Cloudflare: make sure you know about information technology and that you understand the value that they are providing to their customers.
- Check the company’s financials for the past 10 years if available. Ideally you want a company that is trending in positive profit from the last few years and with low debt. For example https://seekingalpha.com/symbol/NET/income-statement shows that the company is growing.
- Checking insider trading. Are people working at the company selling their stocks? This can be a red flag.
- Apart from seekingalpha, I also suggest taking a look at https://simplywall.st/ to find more useful information. (not sponsored it’s just useful)
- Reinvest dividends back into your account. This will have a cumulative effect on the growth of your portfolio.
Note this guide is not incentivising to invest in Cloudflare. This is only being used as an example. Ideally you should only invest in stocks an amount that you are comfortable to spare.