Hello everyone. I’m @olivertomolife and I love investing and shareholder special offers!
Have you ever had the experience of buying the wrong stock at the wrong time while investing?
I’ve had this experience too, and I’m still holding on to some salted stocks, but I’m always practicing the methods I’m about to introduce.
When you lose money on stocks, you may feel depressed, but this article is for those who feel that way.
This is a technique that even beginners can easily learn, so let’s take a look at it together!
The author has been investing for three years and has experience in the securities industry.
By reading this article, you’ll know how to avoid salted stocks!
What are the five ways to avoid salted stocks?
I will specially disclose the methods I have been practicing to avoid salted stocks.
1 Check the company’s capital adequacy ratio
First of all, check the capital adequacy ratio, which is said to be the most important factor in a company’s finances.
With the exception of venture companies and other growth companies, companies that fall below the 30% figure are at high risk of bankruptcy and often have unstable performance.
Therefore, you need to buy stocks of companies with a high capital adequacy ratio.
If the company disappears, your investment capital will be wasted, and you definitely want to avoid such a situation.
There are plenty of mid-sized companies with good financials out there, so keep an eye out for them!
2 Check the company’s debts
Companies borrow money to invest in new businesses and equipment.
This is why so many companies are in debt.
On the other hand, there are actual companies that are debt-free with no debts at all.
Interest-bearing debt, which represents debt, is said to be 100% on average.
The lower the number, the better, but a high number does not necessarily have a negative impact.
The automobile industry and electric power companies have large capital investments, so their interest-bearing debt is inevitably high.
Financial institutions that actually provide loans will only provide funds to companies that they deem capable of repayment, so it is important to consider this as a guide only.
3 Check the company’s major shareholders
Major shareholders, who hold the most power in a company, are the major shareholders who own more than 10/100 of the outstanding shares.
Since they have the power to make decisions in the company, if the major shareholder is autocratic, the company management may suffer.
Some Japanese companies have major shareholders from overseas, and some of them are suspected of violating the law, so you need to check carefully.
In fact, there are companies with high capital adequacy ratios that have low shareholder returns for their major shareholders, so we need to be careful.
4 Buy more stocks
This method is a measure you can take if you have a certain amount of money to spare.
However, judging the bottom of the stock price is not an easy task, so you need to be careful when buying more stocks.
When you buy more shares, the average acquisition price will decrease, but if you buy more often, it may have the opposite effect.
Therefore, it is important to hold only one unit and take your time.
5 Check the chart for 10 years
For short-term trading, it is not really necessary, but for long-term investment, it is important to check the past movements of stock prices.
Companies that have had corporate scandals, hostile takeovers, etc. will always have characteristics in their past stock prices.
By doing this, you can learn about the history of the company, which is important to know.
Since various external factors affect the movement of stock prices, it can also give us hints for future movements.
It may be difficult at first, but keep at it a little bit, and you’ll learn to read the charts, so keep at it!
Advantages and disadvantages of salted stocks
I would like to introduce the merits and demerits of my experience with salted stocks.
- Sometimes you can get dividends.
- You may be able to receive preferential treatment.
- There is a possibility that the stock price will recover.
Even if the stock price goes down, there are advantages as mentioned above.
I’m sure you’ve had the experience of selling a stock in a hurry, only to see it soar the next day…
So face your salted stocks with a level head!
- Losses may increase.
- Dividends may be lost.
- The company may go bankrupt.
The stock price may drop, causing more negative effects.
Therefore, take a close look at the company’s indicators before you buy the stock.
And, as I’ve said many times before, don’t be in a hurry, and remember to stay level-headed!
- Check the capital adequacy ratio
- Check the company’s debts
- Check the company’s major shareholders
- Consider buying more shares.
- Check the 10-year chart
There you have it, five ways to avoid salted stocks!
There are no absolutes in investing, so if you find yourself in a salty situation, please try to remember these methods.
Please remember these methods if you find yourself salted.
Thank you for reading to the end!