Knowing the good from bad: choosing the right share tips

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Share tips come in various forms and from sources. Their abundance and easy availability makes it easy for investors to fall for fake or spurious tips that can possibly jeopardize their investments. There are several ways of finding out whether these shares are worth relying upon. Double checking the share tips you are provided will not only ensure your success in share trading but will also save you incurring losses.

1. Research: There is no substitute to research and analysis for effective trading in the stock market. In fact it is the basis on which the whole trading mechanism of the stock market functions. Research means identifying stocks that have potential of earning returns. By checking their financial background, business prospects, managerial team, etc. Various investment appraisal tools like EPS, EBIT, profit earnings ratio help in identifying stocks that serve investors with returns. 

1. Keeping a tab on stock price trends: Stock prices are highly volatile. They change every now and then based on domestic and international forces of demand and supply. If the share price of a company has been steadily increasing over a period of time it can be owed to its growth and indicates economic wellness. However, on the other hand if the stock prices fall in price and deplete over a period of time, it means that the company will soon lose all its capital and bankrupt. It is essential for an investor to let go of these stocks and earn whatever he can out of them in order to negate the losses.

1. Monitoring industry trends: Industry trends or indices are a great way of knowing the business climate of an industry. The index shows an overall picture of the industry depending on which investors can evaluate their investment strategies. If the share tips indicate a rosy picture of a company whose industry is in the decline it is better to dispose such stocks as they will decline in the future causing significant loss.

1. Referring to financial journals: Financial newspapers and journals are the main communicators of business happenings in an industry. They tell to the outer world in a layman’s language what benefit or peril that particular news can bring to an investor. They also offer stock selection guides and investment awareness programs that enable users to select the right kind of stocks and secure a steady investment portfolio.

• Checking the credibility of sources: Like any vital information checking the source of stock tips that you receive is also very important for decision making. Ensure that the tips come from a reliable source that has credibility of providing authentic and real tips that can be relied upon. The research and analytical methods of such sources should also be checked into before making stock buying or selling based on them. There are lot of stock related forums and communities where one can seek guidance and inquiries for such tips and authenticate whether they are deserving to be trusted with your precious savings.