Tips to follow before investing in the financial markets
10 tips you should follow before investing in the financial markets
Many people see that investing in the financial markets is very difficult and complicated, and therefore they resort to when they invest with the help of financial advisors, as they believe that their competence and broad knowledge is the only way that will help them in making the right investment decision.
Of course, no person can make an investment as simple as that. Rather, he must look, learn and acquire the necessary knowledge in order to be able to successfully invest his money in financial markets, but the matter of course is not that difficult.
In order to be able to invest your money successfully, you have to look at the most important aspects that you must take into consideration before embarking on any investment decision, in addition to the most prominent and most important factors and reasons that increase the chances of success and achieve profits for everyone who thinks about investing in the stock market.
And Danma remembers that investing is a process that needs patience and its results appear in the long term. The successful investor knows that it may take several years, so investing in the financial markets in the short term may experience sharp fluctuations. And people who are looking for profit within a short period of time are in fact speculators, not investors, and most of them lose their money. In the short term, markets may act randomly and are subject to rumors and dealers’ psyche that is affected by the emotions of fear and greed.
Below we offer you the most important economic advice and tools in the world of investment and business, the more a businessman or investor is able to use these factors efficiently and as much of those factors as possible in his investments, the closer to achieving financial success through investment.
10 tips you should follow before investing in the financial markets
1- Provides a clear vision
The first step after defining the target business sector, which is of course based on economic considerations and analytical studies, is for both investors and businessmen to then search for commercial companies with clear strategic visions, as this helps to invest in a clear-cut environment.
2- Leadership competencies and distinguished human resources
The leadership and human resources competency is one of the main and fundamental factors in the success of any company, and it plays a strategic role for every company aspiring to compete.
3- Active and promising sectors
It is advisable to invest in these sectors, and the active and promising sectors at the present time include companies that depend on the knowledge revolution and technology such as smart devices, computers and other products that depend mainly on knowledge and technology.
4- High dividend payout ratio per share
This factor is considered one of the most important technical factors, as it is of great importance in determining and measuring the size of the expected dividends per share. Each share has a great characteristic for all investors, and it is one of the clear economic signs of the success and growth of the corporation. Therefore, companies with high dividends reaching more than 25% are the focus of attention and anticipation of investors and analysts.
5- The average size of the capital
This tool can be explained through a study that analyzed more than 100,00 shares of different companies present in the market in a practical step to track the steps of promising stocks. The results of this study show that the behavior of the shares of the presented companies whose annual growth and dividends exceeded the average of 27%. The average capital of these companies constituted about $ 200 million. At the end of the 10-year study period, the average capital of these pioneering companies was estimated at 4.2 billion dollars. So the potential for the growth of medium-sized companies was very remarkably high. Therefore, whoever wants to invest must focus on this type of company.
6- Profitability multiplier at 18 times
The profitability multiplier measures the ratio of the market price of a share to its annual profit, so the higher the profitability ratio for a share, indicating that investors are paying a higher price for each unit of profit, and vice versa. The profitability multiplier is one of the most widely used equity valuation metrics due to its ease of calculation and simplicity of concept.
7- High market share
The investor should look for highly competitive companies in the market, as their competitiveness can be measured through the company’s market share standard. The importance of this element lies in showing the sales volume of the company or organization in relation to the total size of the target market, which includes all competitors. Therefore, this criterion demonstrates the ability of companies to compete in the presence of a changing and highly competitive market, and for this reason, the investor’s knowledge of the market share of the target company is considered one of the most important tools for measuring the success of companies and the ability of their executive management from competition and change.
The studies conducted to examine the market share and the extent of its importance, took into consideration the law of profit repetitions of competing companies. The results of that study indicated that the average promising companies in terms of growth and dividends came at an average of 18.9 times at the start of investment.
8- Leading companies
According to this advice, those who want to invest in the financial markets must be concerned with the leadership element in companies that have a pivotal and important role in providing distinctive products to customers, and that part of their investments should be clear in this direction.
9- The institutions of promising countries
As these companies achieve inclusiveness in the field of successful investment through the awareness of the executive management within companies and commercial institutions, in addition to taking into account the importance of vertical and horizontal expansion, at the level of countries and at the level of geographical expansion. The most promising and emerging countries are the focus of attention of smart companies, as their economic market is considered unsaturated, and therefore the opportunity for growth is great in these markets.
10- Expansive companies
It is another example of the success of the institution and its progress in the field of business, meaning that the company has an expansion plan on the horizontal level by opening new branches from time to time, and this matter will activate and prove the feet of this company and confirm its ability to overcome market obstacles and thus compete with other companies. Therefore, we must take this aspect into account when investing in such companies.
Finally, there is no doubt that each of us would like to be rich in the short term, but it is not a simple matter. Do not expect your money to double in a year, unless, for example, you invest in high-risk assets, such as the shares of small companies. But in this case, it has turned from an investor into a speculator. As you may know, most speculators lose their money.
In the end, we have shown you 10 tips that you should follow before investing in the financial markets, we hope that you have benefited from this article.
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