How Can Investing in Stocks Be Profitable?

We recently asked the question, should you sell Apple stock after the stock price fell. The stock sold for $130 a share a year ago and sells for $95 a share now. How can investing in stocks be profitable when a stock like Apple falls more than 25% in a year? If you look at the last five years of Apple you will see that the stock was selling for $50 a share five years ago, $100 a share four years ago and $60 a share three years ago before the stock rose steadily to the $130 range a year ago. Investing in stocks can be profitable if you invest in a company like Apple when it sells for $50 a share and sell when it sells for $135 a share but how can you do that?


Investing Tips and Stock Analysis

How can investing in stocks be profitable? First of all a you need to pick a stock to invest in and then you need to know how to decide to buy it, keep it if you already own it or sell it before the price goes down. Years ago we asked, What Is the Best Investment for My Money?

What is the best investment for my money? If that is not the question an investor is asking then it should be. Asking what is the best investment for my money leads the investor to develop criteria by which to judge the success of investments. Asset growth, security of assets, opportunity for large gains, and more are good criteria for judging investments. What is the best investment for my money may have different practical answers based upon the age of the investor and general financial circumstances. It is the general consensus of investment advisors that the degree of risk in ones portfolio of investments should decrease over the years and as retirement approaches.

A safe stock is one that has a long history of steady growth, dividends, sound management and stability. A growth stock is one that is based on new products and markets combined with sound management. You can use tools like the stock screener in Google Finance screen stocks according to market capitalization, P/E ratio, dividend yield and price change in the last year. Once you have picked a few possible stocks based on your criteria it is time to decide if any of these stocks might be profitable. Here you look at intrinsic stock value.

In the aftermath of the stock market crash of 1929 in the early days of the Great Depression Benjamin Graham introduced the concept of value investing. No longer would those buying and selling stocks need to act like they were at the casino. With the concepts of intrinsic value and margin of safety Graham taught investors a rational means of investing in stocks.

The dictionary definition of intrinsic stock value is its fundamental value. It is obtained by adding up predicted future income of a stock and subtracting current price. It can also be seen as actual value of an equity versus its book value or market value.

If the intrinsic value of a stock is more than its market value you should consider buying it. If the intrinsic value of a stock is less than its market value you should not buy it. The point is that a stock price will eventually move to its intrinsic value. Picking underpriced stocks and getting rid of overpriced stocks is how investing in stocks can be profitable.

How Can Investing in Stocks Be Profitable? PPT

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