I want to learn
- Mutual Funds
How to Pick Stocks in Indian Market
Investing in stocks is one of the best ways to get good returns. You would have heard stories of people becoming millionaires after investing their money in a good company. But that didn’t happen in a day; they would have realized the fruits of their investment after say 15 or 20 years. Patience is very essential when you are an investor in stock market. Greediness in making quick money from stock market will only result in huge losses. Each and every investment decision should be backed by reliable and strong research recommendations. Investing has to begin early in life and should be done on a regular basis. You need not be a stock market expert to begin buying stocks. You can learn the nuances in stock trading over the period of time. But careful research about stocks is needed before investing. There are financial advisors and experts who can advice you on how to pick the best stocks.
There are many articles and books on how to choose good stocks. You can read these to get a clear understanding about the various criteria that have to be taken into consideration while stock picking. In this article, let us learn on how to choose stocks and also learn tips on investing in stocks.
Guide to stock picking strategies:
The most important step in buying stocks is to put your hard earned money in the right place. If you don’t allocate proper time for this step, you face losses. So how to choose a stock to invest? You should know the fundamental aspects such as nature of their business, their operations, balance sheet, etc. Have a clear picture of the company’s financial position before buying its share. This can be known by reading the research reports of the companies. Understand the company’s future plans, projects, etc. and analyze if the business would remain sustainable in the future.
Your risk profile also plays a major role in selecting a company as there are 3 categories such as large cap, mid cap and small cap companies based on their market capitalization. If you are averse to risk, then you can invest in large cap companies; risk you may face in investing in these companies would be less as these are already well established companies. If you are an aggressive investor, you can invest in small cap companies; these companies are like the start ups which may become a runaway success overnight or they may even become a flop show altogether. That’s why the risk involved is high in case of investing in these stocks. Financial advisors too help you with stock picking tips.
Technical charts give a fair idea about stock price movements which can be used to know how the stock has performed over a period of time. By using both technical and fundamental views of the stock, you can arrive at a conclusion about a stock.
This plays an important role in a company’s growth and future prospects. Understand the key persons, promoters of a company and find out their management practices. In the recent past, many companies have lost their reputation mainly due to poor management and fraudulent activities by management.
Company’s debt-equity ratio:
This ratio indicates the percentage of money financed by banks and shareholders. Usually, a company with lower debt-equity ratio is preferred by the investors because such a company is said to be more stable than the one with a high ratio. So this ratio too has to be considered before investing.
Don’t buy stocks based on rumours:
Emotion should not be the deciding factor while buying stocks. Based on rumours, don’t take any investment decision.
Preservation of Capital-the priority:
While investing in a stock, preserving your capital and minimizing risk should be your priority. You should know clearly on how much money you can afford to lose. You cannot do gambling; all your investment decisions have to be supported by research. Have a clear idea on how to pick stocks for long term.
How to pick stocks for day trading?
Day trading or Intraday trading is buying and selling of shares within the same day. You have to select those stocks that have high liquidity. Don’t buy stocks that are highly volatile because these kinds of stocks may over react to any news in a bigger way. Conduct thorough research and then buy a stock.
You can buy shares of a company from primary as well as secondary market. Due to high liquidity, you can encash these shares anytime as and when you need. To begin investing in shares, you need a demat and trading account which can be opened in no time. Hope this article gave a clear picture on how to pick stocks for investment purpose and trading purpose too.