Question

What kinds of information would you like to have before you invest in a particular common stock or mutual fund? From what sources can you get that information?

Answer 1

Common stocks are equity Investment instruments that signifies an ownership position in a corporation. Where as mutual funds collect money from all available investors and invest that money in securities like stocks, bonds and debentures.

Factors that kept in mind before investing in securities

• Management of the company - Before investing in a company we want to analyse the strategies , mission, vision, and daily operations of the company from the management itself.
• Profitability of the company - Through ratio analysis, common size statements and trend analysis identify the profitability of the company and compare it with other possible company's statements which you can invest. From those deatiled analysis you can select the best.
• Value of the company securities - Identify the market value of the stock through dividend discount model or relative valuation model and spot the value of the security and how much you can earn from it.
• Opportunity cost of this security investment - Opportunity cost is the next best alternative forgone for obtaining a thing. consider all investments and identify the opportunity cost of this investment.
• Dividend - How much of dividend this investment is providing than other investments we are forgoning is to be kept in mind before making a new investment.
• Earnings Growth - Consider the net gain in income that a company has over time. Through calculating EPS and price earnings ratio we can identify this.

Sources of information

From Newspaper, Magazines, Directories, Governmental statistics, databases and persons who are already investors in this particular investment we can get the information of this securities. After getting the information through conducting a detailed study and research of securities, by the help of ratio analysis, common size statements, and trend analysis we can take maximum information about those securities. From these all ways we can collect information about investing in common stock and mutual fund.