Stock markets seem to be favourite place for investors to churn money. Some call it a mere gamble while others call it speculation or calculated risk. Whatever you call it, it is immaterial. It has and will remain to be an attractive source of multiplying your earnings. What do you need to do before investing your hard earned money into stocks. I would like to list down few steps which if followed religiously can yield you good returns. Remember I am not here to list down the stocks that you should buy, instead try to help you out in chosing the right one by taking calculated risk
Prepare a Watchlist
Just do not jump into the market as soon as you have ready cash. Spend sometime in watching the market movement. Believe me it is not as simple as it seems. Study how it behaves owing to different macro economic factors. Prepare a watchlist that would contain stocks that you feel can earn you profit. Do not spend much thought in chosing these stocks. Take help from certain brokerage advice and just prepare a list. Ensure you have a diverse portfolio. This means you have stocks from different sectors i.e IT,Pharma,Infra etc. Watchlist should not have more than 15-20 stocks. Keep a watch on these stocks over a period of 2 months. During this time you can add or remove a stock as per your wish and note the reason for doing so. After 2 months you should be ready to make your first investment. Offcourse, if you still do not feel confidenct, take a month more.
Look for Stocks having strong fundamentals
Assuming you are ready now to make an investment in stocks, look for stocks with strong fundamentals. Strong fundamentals in layman terms implies companies that are well known and have posted good results in the past. I would not go into details of the financial terminologies as it will be difficult to decipher for those from non financial background. Just look for stocks of companies that are well known. Once you have decided for the companies then you apply the next step.
Price Pattern of the Stock
Just because a stock has strong fundamentals, it does not mean that will earn you money in the future.
There are certain stocks that hardly move over a period of time. i.e they are less traded. Next step is to look out for the volumes traded per day. This will give you an idea whether the stock is more traded or less traded. Avoid those which are less traded as they would not yield positive return in the long run.Then look out for the price pattern of the stock over a period of 1 month, 3 months, a year and hence forth. There are numerous websites that provide you these information. Price pattern gives you an idea whether it is the right time to buy the stock or not.
Long term Investor
One should have patience and look to invest for long term in stocks. That does not mean that you make an investment and forget about it. Keep a watch on the price movement. If required sell to book profits or buy more of it. Always keep a Stop loss.You will gain experience about this as and when you spend more time watching the market movement.
Listen to everyone's advice but follow your own
This is by far the best strategy. You will come across advice about a particular stock every now and then by different brokerage agencies. Do not follow them blindly. Most of the time they ask you to buy stocks which already form part of their portfolio. As more people buy the advised stock, its price rises. This enables them to sell off and book profits and you as an investor lose your money. Remember the money you lose in the market is gained by someone else. So, you need to be smart to retain your money and pull out money from other's pocket too. This does not mean that you do not pay heed to advices by the brokerage houses. Listen to everyone and use your intellectual to decide how a particular buy or sell can impact your portfolio.
Finally, keep a vigil on the market movement. It will always give you opportunity to buy or sell. You have to keep your eyes and ear open. As for how will the market behave tomorrow or day after , sadly nobody can predict. In order to earn in an uncertain market, you have to use your intellect and sometimes gut feeling to make the investment. Happy Investing. Let me know if this write up helps and do write to me if you have any queries. I would be more than happy to help you out in whatever capacity I can.
Prepare a Watchlist
Just do not jump into the market as soon as you have ready cash. Spend sometime in watching the market movement. Believe me it is not as simple as it seems. Study how it behaves owing to different macro economic factors. Prepare a watchlist that would contain stocks that you feel can earn you profit. Do not spend much thought in chosing these stocks. Take help from certain brokerage advice and just prepare a list. Ensure you have a diverse portfolio. This means you have stocks from different sectors i.e IT,Pharma,Infra etc. Watchlist should not have more than 15-20 stocks. Keep a watch on these stocks over a period of 2 months. During this time you can add or remove a stock as per your wish and note the reason for doing so. After 2 months you should be ready to make your first investment. Offcourse, if you still do not feel confidenct, take a month more.
Look for Stocks having strong fundamentals
Assuming you are ready now to make an investment in stocks, look for stocks with strong fundamentals. Strong fundamentals in layman terms implies companies that are well known and have posted good results in the past. I would not go into details of the financial terminologies as it will be difficult to decipher for those from non financial background. Just look for stocks of companies that are well known. Once you have decided for the companies then you apply the next step.
Price Pattern of the Stock
Just because a stock has strong fundamentals, it does not mean that will earn you money in the future.
There are certain stocks that hardly move over a period of time. i.e they are less traded. Next step is to look out for the volumes traded per day. This will give you an idea whether the stock is more traded or less traded. Avoid those which are less traded as they would not yield positive return in the long run.Then look out for the price pattern of the stock over a period of 1 month, 3 months, a year and hence forth. There are numerous websites that provide you these information. Price pattern gives you an idea whether it is the right time to buy the stock or not.
Long term Investor
One should have patience and look to invest for long term in stocks. That does not mean that you make an investment and forget about it. Keep a watch on the price movement. If required sell to book profits or buy more of it. Always keep a Stop loss.You will gain experience about this as and when you spend more time watching the market movement.
Listen to everyone's advice but follow your own
This is by far the best strategy. You will come across advice about a particular stock every now and then by different brokerage agencies. Do not follow them blindly. Most of the time they ask you to buy stocks which already form part of their portfolio. As more people buy the advised stock, its price rises. This enables them to sell off and book profits and you as an investor lose your money. Remember the money you lose in the market is gained by someone else. So, you need to be smart to retain your money and pull out money from other's pocket too. This does not mean that you do not pay heed to advices by the brokerage houses. Listen to everyone and use your intellectual to decide how a particular buy or sell can impact your portfolio.
Finally, keep a vigil on the market movement. It will always give you opportunity to buy or sell. You have to keep your eyes and ear open. As for how will the market behave tomorrow or day after , sadly nobody can predict. In order to earn in an uncertain market, you have to use your intellect and sometimes gut feeling to make the investment. Happy Investing. Let me know if this write up helps and do write to me if you have any queries. I would be more than happy to help you out in whatever capacity I can.
Thanks for sharing this post!
ReplyDeleteEnjoy every shot, live score and streaming on Webcric Live for free and stay tuned with all the recent cricket updates.