7 Key Metrics Every Stock Investor Should Understand

Don’t put your money on the line unless you’ve mastered the skill of investing

Investing in individual stocks can be both exciting and intimidating, especially for new investors.

Without understanding the key metrics that determine a good investment, you risk losing your money on stocks.

Investing in an S&P 500 index fund provides a more stable return over time. You simply bet on the prosperity of the top 500 companies in the United States. And as the companies in that index grow, your wealth also grows.

That’s why I recommend passive index investing to most people.

But investors who want the potential of much higher rewards can aim for individual stock picking instead — as long as you do this wisely.

Stock picking is a skill

There’s a high risk of losing money when you invest in individual stocks, as some may lose value and never recover.

A good example is the Nokia Corporation (NOK). Nokia, a Finnish telecommunications company, was once the world’s largest vendor of mobile phones. I remember having the Nokia 3210 and 3310 back then. Everyone I knew loved those phones.