Any investment – property, gold or share market needs proper understanding and research about the market. Such study will enable the investor to understand the loopholes in the arena and will make him/her prepared to face risks and losses.
Following are few of things that one should keep in mind before investing in stocks;
1. Know what to buy: It is always advisable before hand to know everything about the company one is investing in. Also it is safer to invest in companies that are familiar and known or whose business is relatively easy to understand. It is like investing without research is playing blind man’s buff game, just running around looking for result.
2. Think before buying: In share market it is important to think before purchasing as one’s purchasing should never be based on anybody’s suggestions. It is better to understand what shares one is purchasing before making the actual decision..
3. Never go for economic and interest rate predictions: Instead of predicting the economic and interest rate figures, it is advisable one need to cut the market noise and concentrate on core fundamentals when selecting investment options. As the more time you spend on analyzing economic and interest rate predictions, the more time is wasted.
4. Good management is vital aspect: Before cornering on the company, one should look at the management and the plans it has in store to deliver the results. What the company’s management is going to do to deliver the desired results formed the main indicator as if the company has a business that one can relate to and if the management has clear plan to deliver on expectations, then it is best option to go for.
5. Be volatile, humble and learn from mistakes: It is well known fact that no one is perfect and we all make mistakes. Instead one should learn from mistakes and then proceed further in a new manner.
6. Prepare yourself for risks: Investments are subject to various risks and market conditions. No investment plan can curb or minimize all the risks. One can only mitigate the risks to achieve higher degree of success with their investments.
7. Stay cool on the short term market volatility: While cornering the securities, just stuck to what is known and what is easily understood. One should keep in mind that the investment in shares brings returns on long term basis and should stay unfazed by short term market volatility. One should always go for good business at the reasonable prices. Just turn as many stones as possible to corner the right gems.
8. Is the company profitable: Lastly one should check the quarter and annual reports of Company’s earnings and look for how much net income the company reported and if the income is profitable then, one should go for that Company.
9. How richly the company’ stock is valued. With basic methods of valuation like price to earning method and price to sales, one can determine the earnings of the company.
10. Competitors: In the arena of cut throat competition, it is better to study the competitors of company in terms of good market share, its dominance in the market etc. Also investors should pay attention to foreign competition where lower cost competition can put pressure on profit margins.
Before investing in shares, one should always understand that shares is not a lottery ticket but a part ownership to business. Investing in stocks can bring rewards but it certainly comes with its shares of risks and uncertainty. Understanding market trends, learning from past mistakes and tracking the successful companies annual reports will certainly make share investment a profitable one.
- Investing in Share Market: opma-oacs.com