Invest in quality business and not stock symbols
Let me ask you how far do you analyze the business you invest in? Well most of the investors don't. They simply follow the symbols or brands of successful corporate houses. If you plan on investing in IPOs, you need to do a complete research about the concerned company, its past performance, how the IPO money will be utilized, details about the company management, and when the operations will commence so that company starts generating profits. Before buying stocks the stocks of a company find out what kind of products they sell, how consistent they are in the sales, how do they survive the competition from their investors.
Scan through the stocks
It is common to see investors investing in the stock that has a great demand. But what differentiates a smart investor from the rest is when you identify which stock are available at a low and reasonable price and which has a great potential to grow in the years to come. Carefully analyze the company and its business.
Maintain the right temperament
Stock values keep fluctuating. Don't dwell on the price of stocks. Instead, study the underlying business, its earnings capacity and its future. If other investors panic when the value of the stock drops you have to maintain the right temperament that will help you get out of that situation. Remember staying invested in a value company will pay you rich rewards over a long-term period. This will help you succeed in the market.
Know how the company uses the money
The success of any business depends on how well its management uses its capital. You can make this analysis on two factors Return on Equity (ROE) and Return on Capital Employed (ROCE). Interpret the company's financial statements and understand the quality of return on his investment. Invest in companies with good returns on capital invested.
Make your own investment decision
It is your money that you plan to invest and you know needs well. So when you to invest in stock don't listen to brokers or analyst. They could probably be selling it to you. Make your own decision. Become a value investor. Don't invest in stocks that are recommended by stock analysts/editors on popular television channels. You should perform your own research then make vital investment decisions. Be a conscious investor.
Sell loss-making stocks during a bull run
The best practice of warren is to sell loss-making stocks during a bull run and buy the winner stocks during a bear hug. The amount you get after selling the stocks could be used to buy stocks with future growth potential and there by achieving better returns.
No comments:
Post a Comment