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What to Look For Before Buying Your First Stock

Your First Investment • Beginner Investing • 7 min

What this lesson is about

"I heard it's about to go up" is not a reason to buy a stock, here's the short, honest checklist to actually run through first.

2 parts · a quick check after each · then the quiz

Part 1 of 2

"I, heard, it's, about, to, go, up", is, the, most, common, reason, people, buy, their, first, stock., It's, also, the, least, reliable., This, thinking, gives, you, no, clear, path, for, what, to, do, next,, whether, the, stock, rises,, falls,, or, stays, flat, for, a, year., A, simple, pre-purchase, checklist, can, help:, what, does, the, company, do,, how, does, it, make, money,, has, revenue, and, profit, grown, over, the, years,, who, are, its, true, competitors,, and, what, risks, does, the, company, identify?

The, last, item, is, easier, to, find, than, you, might, think., Every, U.S., public, company's, 10-K, annual, report, (filed, with, the, SEC, and, available, for, free, on, EDGAR), includes, a, "risk, factors", section., In, it,, management, shares, what, it, sees, as, the, business's, real, vulnerabilities:, competition,, regulation,, customer, or, supplier, concentration,, and, more.

Reading a stock chartThe average is the trend with the noise taken out, nothing more.

Quick check

Before buying a stock, what's a more reliable first question to ask than "is the price about to go up"?

Part 2 of 2

Insider, Angle:, None, of, this, checklist, guarantees, a, stock, will, rise., Nothing, can., What, it, does, do, is, ensure, that,, whatever, happens, next,, you, know, why, you, own, what, you, own., This, understanding, helps, you, make, an, informed, decision, to, hold,, buy, more,, or, sell,, rather, than, just, reacting, to, the, latest, headline, or, price, change.
Try, This:, Choose, a, company, you're, curious, about., Spend, 15, minutes, going, through, the, checklist:, what, it, does,, its, revenue/profit, trend, over, the, last, few, years, (most, brokerage, research, pages, show, this),, one, real, competitor,, and, one, risk, factor, from, its, latest, 10-K, (searchable, on, SEC, EDGAR).

Quick check

Why is it risky to buy a stock purely because of a hot tip or social media hype, without understanding the business?

Quiz

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