The way to choose best stock

Before you buy stock, you should understand accounting and economic. I have seen some people are not actually investing. They are speculating because they just look candle chart, bid size, ask size and then choice the stock. Do you think it is enought to know all of the company information? You ought to know all of the company information before buying stock. And then you should have some emergency fund or liquidity asset. If not you need to sell your stock with low price when you need money urgently.


If you are planing to buy stock, you much think that you are not buying stock, you are buying company. You should also know market capitalization to know which kind of company is suitable for you. If you don't want to take too much risk you should invest in Mid Cap stock and Large Cap stock but generally you will also get low return. I will explain alittle more detail about market capitalization.

Market Capitalization = Oustanding share (Issue share) * share price

• Micro cap, company have amount under $250 million
• Small cap, company have amount between $250 million to $1 billion
• Midium cap, company have amount between $1 billion to $10 billion
• large cap, company have amount between $10 billion to $50 billion
• Ultra cap, over $50 billion

Before you buy stock you should check annual report to know following.

• Asset
• Liabilities
• Net profit
• Equity ( Asset - Liabilities)
• ROE ratio
• Earning and Equity increase ratio
• Book value VS Market value
• Payout ratio

1. Asset mean how much company owne

2. Liabilities mean how much company have debt to pay

3. Equity some time call share holder equity or net asset

Equity = Asset - Liabilities

4. Net Profit mean how mcuh company earn

5. ROE company management is doing well or not, generally ROE ratio 10% or highter is good. To know ROE is simple.

ROE = Net profit/ Equity

6. Earning and Equity should increase at least 10% for each year

7. Book value Vs Market value book value is same as equity and market value is same as Market Capitalization. Generally market value is highter than book value but it should not too different. if market value is too highter than book value, you should think you are buying more than actual value.

8. Payout ratio to know payout ratio you should know about divident per share and earning per share. All you can see in conpany balance sheet. payout ratio should be between 60% to 70% ( Lower is better)

Payout ratio = divident per share / earning per share

Remark : Equity, Asset and Net Profit should increase at least 10% to 15% every year.