For the average stock investor, the greatest asset towards becoming a great investor is information. This information can be both broad in regards to research and trading strategies, or specific information about a company they are interested in investing in. In the arena of today’s stock investing, there are tons of information available on the internet that provides access to a lot of these key components. Most of these are in the form of financial blogs.
Financial blogs are a great resource because the overwhelming majority are authored by experienced professionals and retail investors who are fairly active in the market. They lean on their experience and knowledge to provide their readers tips and information that can inform them on how they can invest in today’s market in the hopes to allow them to make money long term. For anyone starting a financial blog, they should make sure they cover these five things.
1) Market Sectors to Invest In
It’s important to discuss with a stock investor, before doing any quantitative analysis, that they understand the background of the company and how their business model works. This means understanding the sector and industry the company is in and what its main competitors are. There are currently 11 sectors to categorize stocks in this market based on Global Industry Classification Standards (GICS). Then within those sectors, there are more specific industries or sub-sectors that refer to main competitors in equivocal spaces.
2) Growth vs Income Stocks
It is important that before an investor buys a stock, they have a clear idea of how they can expect to make money. Therefore, it is important to communicate in a blog the two main stock types, which are growth stocks and income stocks. It’s important to explain that in a growth stock, you will only be able to profit by selling equities at a certain point and realizing a capital gain. Alternatively, you can invest in annual, quarterly, or monthly dividend stocks, which typically are less volatile in price, but over the long term, holding shares entitles you to income to your portfolio that can be sent as cash or reinvested.
3) Market Cap Categorization
Its also important to communicate another key metric in categorizing companies, which is explaining the categorization of market cap. Market cap is a measure of defining the number of shares of a company times the current stock price, which signifies how much capital is tied into the companies share equity. Explain the three main sizes, which are small, medium, and large-cap, and explain how large-cap companies are typically the more established safe plays, while small caps tend to be riskier due to size and typically are on less stable ground in terms of accounting metrics.
4) Fundamental Analysis Metrics
After explaining in a blog some of the basics, it’s time to start focusing on analytics to help an investor pick the right stock at the right time. This is where discussing fundamental analysis is really important. Explain to a stock investor the importance of analyzing quarterly reports, and how the three main things to look at are a companies balance sheet, income statement, and cash flow analysis. Show how investors ultimately focus on two main numbers, which are quarterly revenue and earnings per share, commonly referred to as top and bottom line respectively. Also, explain the importance of looking at free cash flow to compile a discounted cash flow model to assess companies intrinsic value, which is a key model for determining whether a company trading at a specific price is a good buy point.
5) Technical Analysis Metrics
You will want a section geared towards the more advanced traders and investors that explains the value of technical analysis, and how it could help optimize returns and preserve held value in the stock market. Technical analysis does not impact the long-term holdings of a stock typically, but can definitely interfere with the short-term holdings. Technicals are driven mainly by day traders who seek out patterns of buying and selling and try to ride these momentum waves through quick buying and selling. Explaining how important it is to not get caught in these traps can be beneficial for the investor.