Before you enter in stock market you should make some basic decisions mentioned below.
- How much you trust in corporate India. As you are investing in Indian companies , you must have faith in Indian economy as well as growth of a country.
- You want to invest in stock market or not. You should have idea that you are investing somewhere in business. You should understand the business at least you are investing in. First ask yourself either you want to invest in some business in form of invest in stock market or not? Don’t invest just because your friend is investing or you hear somewhere that its good chance to make money, let’s try it!
- What do you expect from your investment? If stock market looks convincing then decide what do u want to achieve from your investment. Either you are doing for making wealth or you are satisfied with little gain.
- You are long term or short term investor. If you want to make wealth then you should hold your investments for very long term, say ,10,20 or many years. In contrast, If you are satisfied with little gain then short term investment strategy is applicable for you like trading or holding for 4 to 5 years. Its not guaranteed that short term investments always earn profit
- How you react in sudden fall in price. Stock market is all about ups and downs. If you get panic in sudden fall in prices of your stock then it is not for you. You have to understand what is the reason behind that fall and then act accordingly.
Before buying a stock, have you ever followed any of steps mentioned above ? 98% people would say ‘NO”. People enter in stock market either by influence or just to try their luck. This is how people buy stocks suggested by their broker, some friend or any expert. But stock picking should be given at least that much time you give in purchasing refrigerator or microwave oven. It is not that simple as it seems and not that complex as well if you do it properly. It is personal preparation as much as knowledge and research that distinguishes the successful stock picker from the chronic loser. Ultimately it is neither the stock market nor even the companies that determine an investor’s fate. It is the investor himself.
I will explain you in this article how people considers stock picking and how it really should be.
It is nothing like stock-picking is hereditary talent. Though, many people would like to blame their losses on some inbred tragic flaw. They believe that others are just born to invest, my own history refutes it. This is just an excuse to not analysis a company. People just want to earn more money in short time just be following some expert’s advise. Do you think it is that simple? If it would be like than at least some people would gain much money by just following some expert advise. So buy a stock by using your brain only and analyze a company in which you are investing your valuable money.
Investing in stock is an art not a science. That’s why studying history and philosophy is much better preparation for stock market than studying statistics. People who have been trained so rigidly quantify everything have a big disadvantage. If stock picking could be quantified, you could learn that from nearest computer center and make a fortune, but it doesn’t work that way. All the math you need in stock market you get in primary education. It is just simple logic that you have to apply during research of a company. Its not rocket science.
Let me give you a simple example. Wall street thinks just as the Greeks did. The early Greeks sit around for days and debate how many teeth a horse has. They thought they could figure it out by just sitting there, instead of checking the horse. A lot of investors do the same, instead of checking company they sit around and debate whether a stock is going up, as if the financial muse gives them the answer. 😊 It sounds silly but everyday the experts confuse cause and effect on wall street in offering some new explanation for why market goes up.
Mister Johson had changed America’s mind about investing in stocks. He believed that you invest in stocks not to preserve capital, but to make money. Then you take your profits and invest in more stocks and make even more money. According to him “Stocks you trade, It’s wives you are stuck with.”
Source:One Up Wall Street