Green investing can also include buying stocks of companies that develop wind farms or produce solar panels. Companies that also produce food and products sustainably using less water and energy also fall within this category.
While most stock investments may face a possible recession, green stocks continue to show increasing resilience to downturns in the exchange markets. And over time, they could prove to be a sustainable investment option.
Green zone ratings all depend on these essential factors to determine their viability. These are:
• Momentum
• Volatility
• Size
• Value
• Quality
• Growth
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The Best Time To Buy Green Stocks
Depending on the market sentiment, stock prices fluctuate often throughout the trading day. Where there’s a favorable earning’s report, it boosts investor confidence in the green stock, as the stock prices soar, and so the demand increases.
Conversely, in case there’s negative news such as the FDA disapproving the certain biotech drug can spark instant selling, as investors seek to limit their losses.
A great source of information is the overnight news after the closing bell (which sparks after-hours trading) and morning headlines (which drives pre-market trading). Generally, stock prices usually stabilize by midday.
Investing in Green Chips
Public companies that operate in the green industry are considered as green chips; these companies may carry out business activities in any of these categories:
• Recycling or waste reduction
• Renewable energy (such as solar, geothermal, and wind energy)
• Water and aquaculture
• Control of pollution
• Green transportation
• Organic agriculture
Although these stocks are relatively more volatile than blue chips, most investors overlook the limitations and instead wait for them to surge during the bull markets. But during recessions and bear markets, most investors flock to buy the blue chips that may prove to have more predictable returns.
Finally, the government support to green chips and to the end users of their products also influence their performance in the exchange market. Where there are high subsidy levels, they perform well, and conversely, they dip with reduced government subsidies.
Understanding the Price-to-Earnings (P/E) Ratio
P/E Ratio=Stock Price/Earnings-Per-Share (EPS). Most financial sites already publish this data, and so you won’t need to calculate it from scratch.
The P/E ratio is a quick way of assessing a company’s performance based on its earnings. A high P/E ratio of a company relative to its peers or historical values means investors are confident of increasing future earnings, and thus they willingly pay more for shares right now. While a lower P/E ratio suggests lower investor confidence, signaling a possible slump in prices going forward.
In simple terms, the P/E ratio is how much it would cost you in investment to get $1 in profit. It’s a measure of the stock’s performance relative to its industry peers, or itself (historically).
“Buy the Dip”
Seasoned traders often wait for the right time to scoop up more stocks when the share prices drop and inexperienced investors sell out in a hurry to avoid losses. This strategy is referred to as “buying the dip” and it ensures that such experienced investors hold more green chips at a much lower price. Ultimately, this proves to be more profitable when the share prices stabilize.
Final Take-aways
Here are some takeaway tips to help you better maximize benefits during market fluctuations.
1. Set Goals
You may set goals based on what you aim to achieve trading in the stock exchange. Such goals may include specific dollar amounts in gains, a certain rate of return, or even gaining a better understanding of a given market sector.
2. Consult a Tax Professional
Active traders operating a taxable brokerage account are subject to capital gain taxes in the short-term, which in turn cuts back on your net returns. A little tax knowledge helps you avoid some costly trading mistakes, making you a better investor.
3. Know your Limits
Sometimes it’s best to count your losses and try your luck in other asset classes while trading at the exchange. This will ensure that you don’t affect other financial goals you have set. If you want to learn more or compare different stock investing platforms, our Motley Fool Vs Seeking Alpha can guide you.
4. Diversify your Investments
Diversify your investment portfolio to cushion you against market downturns.
And finally, you can learn more about buying and selling green stocks in the green zone fortunes review to help you sharpen your trading skills.