You are at the right place and the right time. You might think how do I tell you as right time? Because you can not time the market, in simple words there is no right time to invest in stock market but there is a way How to invest and when to invest in stock market.
Interesting!! Let us understand with better way and example.
You know common investor tendency is to follow the tips, news or to follow the big bulls of the market and even after copying them, they landed up with loss in their accounts.
The simple answer to it, you must give a time to stock market. You wonder that if you had copied the big bull’s portfolio then why am I doing loss? It is just because you never know when he/she has entered in to market and how much time they gave to those particular stocks.
You just entered up based on information that might have older for those big investors but latest for you and ultimately you caught up in trap and make losses. This happens to almost all common investors with same tendency.
Seems complex to understand right? Never mind.
In simple word don’t rely on such news or portfolio, I will give you and interesting idea & steps to invest.
+Volatility is good sign of market which gives you time to enter and exit.
+Never copy others portfolio.
+Never take position based on TV news Or Tips.
+Be with investor mind set not as a trader.
+Investor always studied before invest irrespective of any instrument / commodity.
+Never ever use exposure to buy a stock. Just buy a stock within your credit limit. This will help you to give time to stock to increase.
Now we’ll understand how to select the stocks to invest.?
Take a pen and paper with you or note down the answer of my questions which ended up with an answer of above question.
- Think which company’s product you used since long time Or since childhood and still it is in the market.? (E.g – Colgate, Amul, Cadbury etc.) Think Which companies are manufacturer of these products?
- Which product can be used by next generation.? (E.g. Salt, Sugar, Computers, technology – Now identify such companies)
- Which shops/Brand usually has more people /crowd since long time? (E.g. Dmart – Identify such companies & historical price)
- On which product you Or your family members are rely on?
(irrespective of any age) -E.g – Internet , Electricity – Identify such stocks.
- Which product do you buy first while shopping? ( e.g Cloths , Jeweler , Grocery – Identify such companies )
- Which company’s Bike or Car do you see the most on road? (e.g Maruti – See the historical price data) Identify such companies.
- Which companies are dealing in to children and women’s goods? (e.g – Biscuits, Chocolates, Jewelry – co. HUL /P&G etc -Identify such companies)
Now I am sure you get few of the company’s name in your diary.
Now Question is that out of this which companies to select / is there any alternative companies are there in market which perform better than this.?
Or Why to research on this – As we got the companies list/name, isn’t it??
Let me ask you one question:
Do you buy anything without getting an information / Try /Test??
I know your answer is NO.
You don’t even buy a shirt without trying / testing. Isn’t it right?
Let us understand how to research for the company without having any experience OR technical knowledge.
1) Try to find details of company / News / Scams If any.
- If company is involved in any scam then we should avoid such company as there is more chance to repeat the same in future.
- We should choose well known and reputed company for long term investment.
- E.g. (Find out the company name / Owner who involved in such scams).
2)Management / owner of the company.
- Always pick a company which has proven track record and good management.
- E.g Ratan TATA Group ( TCS) – Look at the growth. -(Given for example only) – find out such companies.
3) Try to choose debt free company.
- Never invest in a company which has huge debt in market.
- Pries of these companies won’t increase.
- They may sell their assets to clear the debt.
- Dividend may not be paid.
- Where do you invest if you have 1000cr to invest. ( debt free right )
- E.g Alok Industries (Given for example only) – find out such companies.
4) Sales and profit growth.
- Always see that sales of the company is growing or not.
- Also see that profit of the company is growing with sales or not.
- If sales is increasing and profit doesn’t means company can not sustain in long run as it has lower profit margin to grow / expand.
- If only profit is there but sales is not increasing then lesser chance of growth / dividend.
5) Return on Capital Employed ( ROCE )
What Is Return on Capital Employed (ROCE)?
Return on capital employed (ROCE) is a financial ratio that can be used in assessing a company’s profitability and capital efficiency. In other words, this ratio can help to understand how well a company is generating profits from its capital as it is put to use.
ROCE = EBIT/Capital Employed. where: EBIT=Earnings before interest and tax Capital Employed=Total assets − Current liabilities.
6) Have a investor mindset.
- Think you are a multi-millionaire and wanted to invest in some good companies.
- What Will you look in those companies?
- What will be your time span of investing?
- What do you expect from company management?
- Many more questions to add but wants you to exercise.
Hope this article helps you to identify good company and develop good mind set to invest in stocks market.
I am sure now onwards you don’t rely on news / tips and be a good investor.
+Mr. Warren Buffet Rule +
- “Rule Number One: Never Lose Money. Rule Number Two: Never Forget Rule Number One”
- “If the Business Does Well, the Stock Eventually Follows”
- “It’s Far Better to Buy a Wonderful Company at a Fair Price Than a Fair Company at a Wonderful Price.”
- “Our Favorite Holding Period Is Forever.”
Disclaimer: Above information is given for knowledge purpose and not promoting /demoting any companies. Given names are just for an example only.
Niral ( Niralnexus.com)
Keep learning, investing and Growing.
For any Question you can reach me @ firstname.lastname@example.org.
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