Reading the Financial Pages for Dummies®

Chapter 18. Ten Things to Know about a Share

The investing business involves more than just getting a tip from somewhere and then looking up the price to see that it's okay. If you're going to protect yourself properly against making the wrong decision, you need to ensure that you've done most of the following.

Knowing What the Share Price Has Done During the Last Five Years

Forget about how the share has soared in the last six months. Take a look instead at how the price curve has shaped up over a five-year period, or maybe even longer, because your company may be experiencing only a brief upturn during a period of long-term price decline.

Many of the online share price-charting facilities have a button that lets you specify 'all available data', or something similar. (On the FT online site, you access this through an 'Interactive Charting' option that's rather easy to miss.) In practice you'll probably get a chart that goes back to 1986 or thereabouts, because not many electronic records go back farther than that. But that timescale ought to be more than good enough for your purposes.

Lots of share price charts also have a section that records the volume of shares traded over a period of time. Was the buying and selling activity particularly vigorous in any periods? Try to find out why.

Lastly, don't forget that most share price charts have been corrected to allow for any scrip issues (which happen when the company issues new free shares to its shareholders that effectively dilute ...