Stock market has it’s own temptation ,attraction towards it is natural .The kind of wealth it has created for people around the world is mesmerizing. However there is always two sides of a coin . People have lost hell lot of money if not done enough research needed .As you have decided to invest in stock market ,before investing there are certain rules you should know . So here are the top 5 golden rules & How to choose stock before investing.
1. Purpose :
Purely put, Any one want to invest in order to create wealth. If you are worried about things like retirement, children education, their marriage, any medical emergency, investing in the stock market does provide you major support .Whether you’re starting from 1 rupee or have a few thousand rupees saved, investment helps in securing not only your but your whole family future . Investing Basics will help get you going on the road to financial .To illustrate let us see the returns given by various index and stocks in last 5 years and compare it with any other investment made by you .
As you can see some of the stocks gave you more than 1000% return which is beyond any other investment return like gold ,land ,fixed deposit etc. If you have invested & bought 1000 shares of Avanti feeds Rs. 36,500 it has given you a 8 X times return. You would have been sitting on profit of more than Rs .296,000 . Therefore ,you might have agreed as for now to start your journey in investing .
2. Investing as a part of business :
I would like to start by sharing a quote with you & relate it to steps needed for better investing .
When you buy share in any company simultaneously you become owner of that company by percentage of shares you own . Now it is up to you to decide what kind of business you think would succeed in future . Instead of going on blind date , if you know some one prior you would have much better chance of building that relationship .Therefore its better to go through enough research about company you are looking to put your hard earned money . As rightly said “Never invest in a stock. Invest in a business instead.”
3. Avoid sheep mentality in market :
Going with crowd is not always the best decision especially in stock market .
In daily life we meet so many people around us who influence us to take decisions based on there perspective about something .Typically of relatives ,neighbors ,acquaintances etc . However if you are looking to invest money its better that you have proper knowledge . Do not go by the name of the company or industry better to know how its performing . What exactly they manufacture? Number of countries they operate in, Know about their flagship product ,peers or the competitors of the business in that sector etc.
4. Thorough Research :
Never go blind while investing in stock market . Restrict your level field for poker or any other speculative adventure .
When one invest proper research has to be done . But what is there to research, answer is many . Therefore few very important points that you need to know we have listed below :
- Owner of the company (CEO) , Management
- Business Model it works on
- Competitive Advantage from its peers or competitors
- Price-to-Earnings Ratio (P/E)
- Debt-to-Equity Ratio
- Net Income
- Profit Margin, low profit margin can be translated as company’s profitability is not very convincing.
- Revenue growth
- Dividends does company pays any if yes than how much
- Beta of that company
5. Right Actions in Guided direction :
Now you know why you want to invest . Which company suits your mindset ,or say type of business you understand better .You have also gathered knowledge about that company , Now it is time to act .
Most people start learning new skills everyday in morning and end up leaving for the rest of his life without implementing . No one has become or achieved expertise in any field ,till he has implemented and failed . Your probability of Success is directly proportional to your knowledge . Now you have done enough research its time to start investing, begin with little amount every month . Try to diversify your portfolio in different sector or else its better to buy index as it contain different companies from various sectors . Check your performance every day . Once you experience few years in market, it will automatically lead you towards a better financial decisions in real life too . We we will be learning another Top 5 Golden Rules on how to choose specific stock or index next time till than Keep learning & keep earning .