Monday, 10 October 2011

Stock Market Investment, how to select shares

Stock market investment is a high liquid investment. At any trading day you can convert it into liquid cash. But one should give much care and attention when select a share to invest in. If you have a trading account and Demat Account you can invest in shares and can trade with shares.

But investment in stock market is not an easy thing. One should study the market and the individual share with a researching mentality. You should analyze the market and particular shares you wish to invest.

There are around 3000 shares are listed in Indian stock market. Out of these 3000 shares and investor must select a few profitable shares. The first and foremost thing is that the investor must select shares from strong companies. But how can we find a strong company? The investor should study and analyse the following things about a company where the investor is interested to invest in.

Know about the business of the company

An investor must study about the business of the company. What business they are doing? Is it a manufacturing company or a service providing company? What type of products they are dealing with? What is the demand and supply of the product? What competition the company should face in the market with whom? If it is a manufacturing company, what are the raw materials and the availability of the raw materials? What is the capacity of the company? Is the company is working at equilibrium point? Are there any promotional chances for the company? What are the challenges and weaknesses of the company? The investor must find answer for such so many questions before buying  shares of the company? When you wish to purchase a house property, you will check all aspects of the house. Just like an investor in shares should check all aspects of the business and shares as they are sharing the ownership of the company with other share holders of the company. So they have to see all aspects of the business of the company.

Management of the company

The investor must know that who is running the company and how. Are they hard working, Competitive etc., Are they running any other business and if so how it is going on? Are they keeping interest of the share holders and they are capable to lead the company to profitability etc., should be checked by the investor.

Whether the company is profitable or not

If all other aspects are fine, the company could not make profit from the business, it is not advisable to invest in such companies’ shares. If the company is continuously running in loss, you must not buy shares of that company. The net profit after tax must be a favorable figure comparatively with their capital investment.

Value of shares is justifiable or not.

The investor must see whether the current market value of the shares of the company is justifiable or overvalued. If the shares are overvalued, you should not buy such shares. So the investor must check the value of shares with a few valuation techniques such as Price Earnings ratio (P/E ratio) Market Value ratio (MV ratio) etc.

Read more about the share and the company

You must read more about the company to know the status and position of the company. You may discuss with any stock investors forum to know the opinion of other stock investors. You can seek the advice of a reliable stock broker. You can evaluate all news about the particular shares. You should study Today stock market, world stock market, live stock market, stock market tips, stock market news etc., to evaluate the shares you are going to buy. World stock market, Indian stock market etc. may affect the value of your shares.

After investing hold it for a long time.

If you are not a day trader, you can hold the shares for a long time, if you invest in strong companies’ shares. When the time goes, the reputation and profitability of the company will be stronger and the value of your shares also will be more.

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Invest in Shares of strong Companies for a long time
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2 comments :

  1. [...] monopoly power, that company can be strong financial future for a long period. One can invest in the shares of such company if all the 5 financial parameters are strong and long [...]

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  2. [...] investor who can find the discounted price and MRP of a group of shares could win the game. Select a group of strong shares such as nifty 50 or sensex 30 etc. Find out the MRP and Discounted price of these shares and [...]

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