Tuesday, 8 February 2011

Invest in Shares of strong Companies, long time

I hope that you are aware about stock and stock market. From stock market you can purchase the shares of different companies and also can sell it off in the same stock market or another. Shares are small units of the ownership of a company. If you buy shares of a company you could share the ownership of the company with other share holders.

The Profit or loss of the share is the difference between the purchase price and sale price of the shares. But the main problem is that we cannot predict the tendency of stock market. It is volatile and today there may be an up in the market and tomorrow the market may be down. The investor could lose his hard-earned money quite easily. Yes, nobody can predict where the share market will be on the next day.

But we can definitely predict where the market would be after a few years. Because the profit of the company reflect in each unit of shares, which is known as Earnings Per Share (EPS - (Net income of shares – dividend of preference shares)/ Number of outstanding shares) and the price of shares also depends on the EPS of shares. The investors will be ready to pay a few multiples of the EPS and this multiple is known as Price Earnings Ratio (PE Ratio – Market Value of a share/EPS)

Good companies grow year after year and the growth will be reflected in the sales and profit of the company. When you invest in shares, choose only such companies those have a growing potentiality. Then the EPS and PE ratio will be increased year after year according to the growth of the company as per the increasing volume of sales and profit. The price of shares also will be increased accordingly.

This means the price of the shares of a company will definitely be increased after a long run as well as the growth of company’s profit. So the investment in shares of a company must be for a long period. You can save tax also for long term capital gain, because the long term capital gain from shares (profit from shares after holding it for more than one year) is exempted from income tax.

We suggest that if you invest in shares invest in the shares of good and strong companies and hold it for a long time and earn a definite gain from the shares.

Invest in Shares of strong Companies, long time


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4 comments :

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  2. [...] financial status, popularity, goodwill etc. You must know that if you invest in shares of strong companies no doubt you can yield a good profit, if you are ready to wait for enough [...]

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  4. [...] it with your hard earned money. One of the important strategies of investing in shares is investing shares of strong company and keeping it for a long time. How an ordinary man can analyze the strength of [...]

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