Greetings of the day to all the members of CCI Family.
After writing exams in Nov’14, I thought to complete my series which I had started an year ago. I know I am pretty late but because of office commitments, exam preparations I couldn’t complete it.
I promise that the coming article with be full of knowledge with some practicality involved.
So it’s high time to complete my series i.e. “A Journey into Stock Market”
Before reading this part please go through the first part in which I have discussed the basics of stock market.
“A Journey into Stock Market – Part 2”
In this article I will be focusing on the following points:
1. Tips for investing in stock market
2. Some basic terms
3. Other factors affecting stock market
* Read the article very patiently, step by step analyze the points and in case you feel stuck start reading it again from the beginning.
So let’s start with it:
Introduction –
a. The lure of money has always thrown investors into the lap of stock markets. However making money in equities is not easy. It not only requires oodles of patience and discipline, but also a great deal of research and a sound understanding of the market.
b. Added to this is the fact the volatility in the market in the last year has left investors in a state of confusion. They are in a dilemma whether to invest, hold or sell in such a scenario.
c. Although no sure-shot formula has yet been discovered for success in market, here are some golden rules which if followed prudently may increase your chances of getting good return.
Monitor Rigorously –
a. We are living in a global village. An important even happening in any part of the world has an impact on our financial markets. Hence we need to constantly monitor our portfolio.
b. If you can’t review your portfolio due to time constraints or lack of knowledge then you should take help of a good financial planner or someone who is capable of doing that.
Investment –
a. If you want to take risk in a volatile market then investment should always be from surplus funds.
b. Let’s say Mr. X earns Rs. 20,000 p.m. If he lavishly invests his hard core earned money in the share market without having a sound knowledge about the company in which he is going to invest, this might create problem in his personal life.
c. So it’s better to step out only when you have surplus funds.
Do not let Emotions cloud your Judgment –
a. Many investors have been losing money due to their inability to control emotions, particularly fear and greed.
b. In a bull market,, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of returns being made in a short period of time.
c. This leads them to speculate, buy shares of unknown companies or create heavy positions in the future segments without really understanding the risk involved.
d. Instead of creating wealth these investors thus burn their fingers very badly the moment the sentiment the market reverses.
e. Thus the fear and greed are the worst emotions to feel when investing.
Understand the company –
a. One of the reasons why an investor loses his money is he invests without having sound knowledge about the company.
b. You should have all the knowledge from the Directors to the EPS of the company.
c. Understand who are the promoters, who all have invested in the company, Equity structure, etc.
d. Understand the Debt obligations, Restructurings etc.
e. Only after this invest in the company.
Analyze –
a. Various ratios e.g. Stock, Debtors, Creditors, Debt, etc.
b. EPS of the company with previous year EPS.
c. Quarterly results of the company..
d. Various Balance sheet items.
e. Other factors.
News –
a. Update yourself daily regarding what is happening in the world.
b. News regarding Acquisitions, Mergers play an important role while investing.
Other Factors –
About the Writer –
CA Final Student (Gave Nov 14)
CIMA Management Level
B.Com (P)
# Any sought of queries or suggestions for the remaining parts are most welcome. Feel free to contact me at sanyam.arora27@gmail.com
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