Thursday, 5 April 2018

It is Important to Remember Before You Invest in Stock Market

It is best to invest in companies who is easy to understand. If you don’t understand the company business, leave it you have many other options.

Favorable long-term prospects.

It’s important to focus on Return on equity rather than earning per share.

High-Profit margin companies grow faster.

Management who are running the company is also the main factor to influence share price.

Make sure to analyze the quality of people who are running the business.

Invest in fewer companies. Maximum up to 10 to 12.

Keep Margin of safety. It means buying a stock at a very cheap price so that even the worst time in the stock market will not highly affect your investment.

Enter in the stock when people are selling or taking an exit. This is the right time to enter as you will get the stock at a cheaper rate. You need to make sure that you have invested in a good performing company.

Patience – This is the most important thing if you really want to earn money from the stock market. Patience is the key to success in the stock market. The perfect example is Warren Buffett. He invests in good companies when it gets undervalued and keeps the shares for years.

Best stocks always give you profit regardless of any situations, because the people who are running the business they know how to fight with the difficult time and win.

Demand and supply influence the share price of stocks. High demand pushes the share price up and low demand pull the share price down.

Check Shareholding patternsA shareholding pattern gives you a clear picture where the total share been held. Promoters of the company should hold more than 30 percent of shares and retail investors (normal investor) should hold less amount of shareholding.

Increase in the promoter’s stake gives an indication that the company is likely to show growth. Why promoters will increase their stake for no reason?

If you are a new trader, then you must apply stop-loss to safe your investment from huge loss.

Do your own research and make a decision. You will be approached by many sources where you will get tips and recommendations. Keep yourself away from such tips and recommendations. Think like a businessman. Do you invest anywhere without doing proper research? No right!

Sometimes you may get influenced by the low share price. Here you need to take control of your behavior and maintain discipline. Do research and see whether the company fits in the quality parameter and then take a decision.

Always put one-time effort on searching best stock and invest in it for a long term. This is how Warren Buffett invest. Short term approach may not give you consistent earning.

At the initial stage, do not think that you became a master in the stock market, because of some profits in your trades. The stock market is a vast field and mastering in it takes years. It’s better to read books on famous stock market investors like Warren Buffett, Peter Lynch, and Charlie Munger.

If you invest money in the share for the long term, then you do not need to pay the tax on the profit you are making, unless you sell the share and book the profit. So, it’s better not to sell the shares if your investment is generating profits.

The stock market is not a place for gambling. Many people in the stock market start gambling and show others that they are earning money in smart short-term trading, but in reality, they do not disclose how much they have booked losses.

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