The stock market is a place where traders can win big! That doesn’t come without risks, though. Investing in the stock market is a complex process with a number of easy pitfalls if miscalculated. Being on the lookout for “bad” stocks can help minimize your risk as an investor and stay on top of your portfolio.
Low Trading Volume
When stocks have a low trading volume, each trade has a larger impact on the value. Essentially, the price is a lot less stable the lower the amount of stock being traded on the market.
Bad History
The history of each stock may very well predict its future. Yes, even the most prosperous organizations have had their fair share of poor earnings in the past. Typically, due to events within the business like reorganization, management changes etc., if the stock you are looking at has a very choppy history with unpredictable earnings, you should beware that your ability to succeed is low.
Look For Liquidation
Keep a watchful eye on any insider traders who quickly begin to sell off all their stock. If an insider begins to liquidate their investment, you should take that as a sign that things may not be looking too great for the future of your investment.
Look At The Stock Value
By comparing and contrasting the company’s value, earnings, debt, and stock price, you will be able to tell if the stock you are thinking of investing in is over or undervalued. An overvalued stock is not a good sign and you should steer clear of investing in businesses with high debt.
Avoid Trendy Stocks
Trends go just as quickly as they come into the market. By the time you hear about a trend on the news or online, the peak time to invest has already passed and it will soon be on its way out.
Cyclical Stocks
Certain industries follow earning cycles. These earning cycles are about as predictable as the economy. Therefore, the prosperity of your investment is quite murky. Businesses like airlines, casinos, and automakers all rely on the economy to generate profit, which can be an unstable investing practice.
Looking for some guidance when it comes to making quality and fruitful investments? Speak to the advisors right here at Supercharged Stocks! Our team of experts loves to see clients prosper and helps teach them the inside tips and tricks when it comes to buying and selling stocks and hunting out trends before they reach their full potential.