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How to Evaluate Stock Performance

Tower Bridge_London_UK_061115C
(Tower Bridge, London, UK - Hsi-Pin Ma)


Value, Size, Momentum, Low Volatility, Quality and Dividend Yield – each of these factors plays a role in the performance of your investment. 

There's an old Wall Street maxim: "You never go broke taking a profit."  However, for most investors, especially those of us who are humans, that's easier said than done. 

A company's worth, or its total value, is called its market capitalization, or "market cap", and it is represented by the company's stock price multiplied by the number of shares outstanding.

The value of a stock is made up of several factors, including the company’s ability to continue making a profit, its customer base, the economy, political winds in the culture, its financial structure, and how the company fits within the industry. Understanding that will go a long way toward helping you select the right stocks for your portfolio.

Stock performance is a measure of the returns on shares over a period of time. There are a number of measures of stock performance and each includes its own characteristics and benefits during an analysis of returns. The period over which stock returns are measured is chosen based on personal preferences, but the portfolio managers usually measure stock performance on daily, weekly, monthly and yearly basis.

Evaluating stock performance is something that is very individual to each investor. Just as every person has different appetites for risk, plans for diversification and investing strategies, so too does every investor have different standards for evaluating stock performance. One investor may expect an average annual return of 10% or more, while another may look to add to his portfolio with a stock that is not correlated with the stock market as a whole. Whatever you look for in a stock’s performance, there are a few variables to consider to help you evaluate whether that stock is a good investment for you.

[More to come ...]

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