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Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market by David W. Bianchi

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CHAPTER 8 ANALYZING COMPANIES (SERIOUSLY, THIS WILL MAKE YOU VERY SMART)

Some people think you can throw darts at a list of stocks, buy the ones the darts land on, and you will do just fine. Other people believe you need to do your homework and dig deep into the details of a company. Here is what you need to think about if you want to really research a company before you buy its stock.

How to Analyze a Company to See If You Want to Buy Its Stock

How should you go about analyzing a company to see if you want to buy its stock? You like what the company sells; is that a good enough reason? That is one way. Other people are buying the stock? That is okay, too. You think they are about to become super successful selling their products and make lots of money? That's a good consideration. You have no clue but you think it is all dumb luck so you just buy anything and hope? There are people who do that, too.

The bottom line is that there is no right way or wrong way to decide how to buy a stock. There are as many different ways to make your stock-buying decisions as there are investors in the world. Having said that, however, you need to know a little about the basic considerations that many professional traders and wealth managers think about before they will buy a stock.

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Some of the things that many people take into consideration before buying a stock are as follows:

  1. Price of ...

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