Wednesday, March 3, 2010

accumulate cheap stocks in down markets

Many people confuse cheap stock with low priced stocks, this is not the same. In this article when I refer to cheap stocks, I mean undervalued stocks, or stocks that are cheap relative to various indicators of value, such as the P/E ratio. With that out of the way here is what you should do.Buy cheap stock and take steps to a good return on your money. Look for companies that may not be the most popular, although they are solid and well managed. Evaluate the business, cash flow and growth factors. Make sure to read the paper and online sources for information on businesses.

Run the numbers on the stock screen. Consider stocks fair value and cash flow situation. Most cheap financial stocks will increase in value if you are patient. With the current economy and accounting assumptions it can be difficult to select a cheap stock. Take a look at losses and write offs, borrowing cost and much more to predict the earning power.

Earning power is a hard thing to predict so buy cheap stock that has been researched in depth. This will help give a clearer picture of how the stock will do in the future. Analyze the short run and the long run projections for the stock. Price to earnings ratio will show the value of the stock. Affecting each shares value and determining how much you will make or lose.

With the current economy there are no get rich quick schemes out there. Although the market will turn around eventually, so be patient and you may be rewarded. Unemployment has had an adverse effect on the market. Along with other economic factors such as the housing market tanking in recent years has affected everyone.

Wait for the stock price to slip below the fair value. With the undervaluation of the stock, it gives a level of safety in the purchase. This will minimize the risk of purchasing the stock and still seek solid returns. Buy low and wait and watch for the value to rise.

Cheap stock trading online is easy with many sites offering free stock trades. Open an account and receive a certain number of free trades. Real time market, limit orders and scheduled investment trades are available. Online brokerage services are convenient and easy to use.

With tools like online trading common folk can sit at home and trade their stock. A computer is the tool that allows you to open an account and invest in the market all online. No need to have a broker to do it for you. Even those with a limited income can buy and trade cheap stock.

By buying shares online that represent a significant discount to value, it enables you to have a small piece of a business at a reasonable price. What the hope is that the future of the business is bright for your stock to increase in value. Economic conditions and of course the performance of the business play a part in the whole picture.

Hoping that the company makes a profit and pays its stockholders the profit or a dividend payment. Some businesses choose to reinvest the profit money back into the business to make it stronger. Both of these scenerios are good for the stockholder. Anytime a business makes a profit it is good.

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