Is Stock Rating a Boon or a Curse?

Is Stock Rating a Boon or a Curse?

Stock rating is a process of assigning the ratings to a stock based on the fundamental and technical studies. The fundamental studies include reviewing income statements, balance sheets, sales, cash flow, working capital, and profits. On the other hand, technical studies include parameters such as price, moving averages, volume, Fibonacci and MACD. Stock rating is done to help investors enjoy multiple gains, because it offers an insight on the potential stocks to invest into. Often, investors contact market researchers to know the stock ratings. However, the investors should keep in mind that the ratings is an individual’s perspective which can even show a bias, so one should trust the ratings only that are displayed on a trustworthy website.

Catering to the mounting customer demand, the stock rating agencies are growing in numbers. The ugly truth is that only some of the agencies have the expertise and an experienced team of researchers who can conduct studies in real time, and can reason the ratings they are assigning. Investors should not go with the fancy language but should check the trustworthy ratings. To find genuine stocks ratings investors must only seek assistance from agencies that carry several years of experience.

Here is a checklist while investing according to the stock rating.

Limit Your Investments Investors who dream of having prolific gains should keep in mind that there can be losses, too. In a matter of few minutes, their entire investment can wipe out due to market fluctuations. An investor should invest only to a limit that he/she can afford to lose in a day, otherwise; the urge to have profits can exhaust your entire investment capacity.

Targeting the Highly Liquid Shares The investor must keep in mind that stock ratings are meant for shorter periods. So, he/she should invest in large caps, which are highly liquid and are traded in large volumes on the stock exchanges, daily. Failing to invest in liquid shares based on the stock rating at the right time can lead to lesser availability or even the absence of these stocks, which may mar the target of earning profits in your portfolio.

Here diversification is the key to success When an investor plans to trade for a longer time, he/she should diversify the stock portfolio. Doing so, allows them to mitigate the risks and losses, and increase the probability of earning profits.

However, this logic holds redundant when an investor is involved in intra-day trading. You can follow 10 stocks but should not invest in more than 2-3 stocks at a time. Why? The reason is that the investor must closely monitor the stocks, which he/she won't be able to do in the intra-day, if the portfolio comprises of more than three stocks at any given point in time. What’s more, since it is a short term trading booking profits while the stock is moving upwards will be wise and re-investing the profits in another stock as compared to holding a single stock for several years and opt gaining much.