Fundamentals of Investing in the Stock market
There are so many cases where people have lost their precious money in stock market. There are few market gurus who have made fortune in stock market by right attitude of investing. Your guru could be Warren Buffet or Peter Lynch or even Indian Business tycoon & ace investor Rakesh Junjunuwala. You should stick to your own values & vision to achieve fortune in stock market. Here are some few tips learnt from all across.
Know thy Business :
Always understand the business you are getting into. If you do not understand the business, you can never value it. For this, ensure that you read a lot about the management, products, their customers, company presentations, their confidence of the future. All this needs to be well understood before you look at their balance sheets.
If the business does well, the stock value will be realized in due time. If a business is good, the daily colour might not be green but the quarterly colour will definitely be evergreen. Just hold on to your business with conviction if it is going good. One day or the other people will run to buy it while you sleep in peace.
Look for a longer horizon:
Look at the long term prospects as well. Today a sector which is the future might be trading low. If after point number 1, you know that the business is growing well, you can invest with a long term vision. Then point number 2 follows.
Buy low and sell high:
Now this is something which almost no one follows. Normally, you will buy when the stock is moving up and sell when the stock is moving down. Once you learn to value the company, you will buy low and sell high.It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Basically, this point is for the greedy who want to make quick bucks. It doesnt take time to lose quick bucks in the market friends. Choose solid value companies at a good price and then sleep over it. Forget the daily movements.
Focus on WHAT & not WHEN:
When buying a stock focus on WHAT will happen and not WHEN it will happen – This doesn’t mean that you do not have a vision. You have to have the common sense of when the business will most likely do better, but the WHAT is very very important.Do not buy or sell a stock based on newspaper headline. Use your HEAD instead. It will pay much more.
Management is everything :
The management board is the key in one’s company is rise or fall. If management is not honest and efficient, you should not invest in that counter whatever may be the prospects. So earlier point is very important.There are 1000s of companies. Don’t forget that there are always opportunities at every point of time. What I am trying to say is that it is worth to spend time studying the counters and then investing. Don’t think that you will miss a chance while studying.
One of our favourite points – Don’t look at the markets but at the individual companies.
Please share if you have your own style of investing. It could help any of the fellow investor.
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