Many novice investors do not know how to buy U.S. stocks or where to start. With so many U.S. stock holdings, how should they choose? Books and online articles all recommend choosing from the four major categories of “food”, “clothing”, “housing” and “transportation”. Are there no other more professional and detailed selection criteria? In fact, this problem can be solved by looking at the GICS (Global Industry Classification Standard) developed by Standard & Poor’s (S&P) and Morgan Stanley (MSCI) to understand more detailed industry categories, which will help you choose the investment target that suits you.
Contents:
- You must know what GICS is when investing in US stocks
- Why can understanding GICS help investors understand how to buy US stocks?
- Global Industry Classification Standard (GICS) 11 major industries
- Do you have any other suggestions for investing in U.S. stocks?
- The Importance of Reasonable Stock Prices
- Other suggestions for beginners on how to buy stocks
Don’t rush to know how to pick stocks. First, take stock of 3 conditions and build an investment strategy
Before entering the stock market, you must first understand your own capital, investment goals, and risk-bearing capacity. You need to consider whether the capital is spare money. If this money will have a significant impact on your life, it is recommended not to invest it. It is best to have an emergency reserve before investing to deal with unexpected events in life. The investment goal is related to how much return you want. In short, if the investor’s goal is to make a profit quickly, you may consider investing in fast-growing emerging industries; if you are more conservative, a stable and growing company may be an investment target that can be considered. In addition, risks can be minimized, but they cannot be completely eliminated. Pre-judge each possible loss and set a bottom line so that your judgment will not be disrupted by the market, but you can maintain your own pace steadily.
“Industries of interest” is an accelerator for knowing how to pick stocks
The United States has more than a thousand listed companies. It is indeed a big challenge for novices to choose stocks, so many people start from the industries they are interested in or familiar with. For investors, investing in a company means that you have a sum of money invested in this company. The company’s future development and performance will be reflected in the stock market, so it is recommended to understand the industry or do some homework before investing. Whether it is through financial books or industry news to understand company information, it will help you understand the investment direction and entry timing. Investors can find real-time news about companies they are interested in for free on the 1455 trading platform, and obtain free research and analysis reports.
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Understanding the U.S. stock industry: How to choose U.S. stocks? First learn about the 11 major industry categories from GICS!
Financial stability of the company
In addition to understanding a company’s product categories, business model or future prospects, using annual reports can also help verify your own judgment. In addition, financial report information can be obtained through the website of the U.S. Securities and Exchange Commission . Financial statements are divided into balance sheets, income statements and cash flow statements, each of which contains different meanings. The balance sheet records the company’s assets, liabilities and shareholders’ equity over a period of time. From this table, we can get a company’s crisis response capabilities and whether it has sufficient capabilities to face emergencies. The income statement reveals a company’s profit performance, operating performance and cost control capabilities over a period of time. If the revenue growth performance is outstanding, it will also be reflected in the stock price. The cash flow statement reflects where the profit flows. The difference from the income statement is that the numbers in the cash flow statement will only appear when there are actual expenses or cash received. Therefore, it is better to examine whether the profit ultimately flows to the cash assets in the balance sheet, or is used to invest in plant equipment, etc. Understanding the three major statements is very helpful for how to select stocks. If you are not familiar with financial statements, it is recommended that you spend some time learning.
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Does the company have a moat (long-term competitiveness)?
After selecting the best industry, you need to investigate each listed company in the industry. Which company has more development potential and competitiveness? In terms of long-term competitiveness, check whether the company has superb technology that is superior to that of the same industry, and whether it meets the development needs of the trend? Can the brand ability and management team help the company develop and grow? After careful analysis and discussion, if all conditions are met, you can consider whether to invest.
The Importance of Reasonable Stock Prices
The rationality of the stock price is very important. The stock price alone cannot determine the value of the stock. The stock value will be different if the dividend and future development are included. Therefore, the stock value cannot be determined by the stock price alone. We can use the Price-to-Earnings Ratio (PE ratio), Price-to-Book Ratio (PB ratio) and Price-to-Sales Ratio (PS ratio) to help us analyze the nature of the stock. Through these three ratios, you who want to know how to select stocks will have a benchmark.
Other suggestions for beginners on how to buy stocks
Investing always involves risks. I hope that all novices can analyze and review the projects mentioned in this article, understand how to select stocks, and reduce the risk of losses when investing, thereby increasing their investment experience.
