Saturday, 31 October 2015

HOW TO PICK GOOD STOCK


In India the volume of investments has somehow depleted in the past 3 years. This market situation leaves extremely fragile scope for any bloopers as far as the common private investor is concerned. The intermittent slowdowns have brought the stock market to a situation where there is always a danger of a double dip; something which small traders and investors can hardly afford at this juncture. Hence, it is absolutely necessary for them to strategies and plan their tactics before making any investment decisions. And this is possible only when they know how to pick good stocks, based on serious and factual knowledge of the market, its history and its current trends.

How to Pick Good Stocks: Strategies and Contours

The most important thing to remember before making any kind of investment is the current financial scenario of the investment destination- whether it is bank accounts, fixed deposits or in our case; the stock market. These do not operate in a financial vacuum and are notorious for their illusive speculativeness and other malpractices. Reading, understanding, observing and internalizing market trends is an art- an art which can be perfected only after years of practice, patience and fortitude. It is no child’s play and small investors with no experience of stock trading can be easy target for frauds. Hence, it is extremely necessary that the investor keeps an eye on the share market, learns its operational norms, peculiar institutional behavior and uninsured risks. Only after the investor, with or without the help of professional advisors, executes this plan of action can he/she hope to make any headway in terms of profits.

However, the ground reality seems to be different. Elated by the realization that they understand market jargons with the help of written material, investors indulge themselves in ill-advised dealings and end up incurring heavy losses. Therefore, in order to pick good stocks, it is important to read and understand the current market scenario in detail.

The next step, in the process of picking good stocks to invest in, is the knowledge of financial record of the target company. Companies and corporations, however big or small, have often been found of malpractices while dealing in the stock market and hence it becomes absolutely essential for investors to run a background check before making any important investment decisions. Before picking a stock for investing one’s money, one must determine the parent company’s moral and practical standing in the market, its production performance in the recent past, its record with the Securities and Exchange Board of India (SEBI), its current situation and future plans of expansion in business and production. Only after a careful consideration of all these factors can one hope to make a truly informed decision.

Another factor to consider before arriving on the final verdict is the ‘Price: Earnings ratio’. This ratio is one of the simplest of parameters to analyze the financial reliability of one’s investment destination and can be very useful in picking good stocks. However, it has to be analyzed with the assistance of professional advisors with the clear notion that in itself, it cannot guarantee financial returns.

How to Pick Good Stocks: The Encapsulation

In hindsight, it seems fair to say that only those stocks which appear reliable in statistics, practical experience and virtual trends, are worthy of investors’ money. One has to realize that after all said and done, in the stock market; that little bit of professional risk cannot be neutralized completely and there can be no one linear plan of action for picking good stocks.