How to invest in stock market ? The answer to which every investor seeks during his investment journey is going to be discussed in this article. The answer includes techniques by which one identifies the right stock at the right time.
The solution is divided into 2 sections: Identify right stock & Identifying the the right time.
The biggest problem lies in the fact that by the time good opportunities are identified, more than half of it is already purchased by early buyers. This leads to rise in stock price.
To start with, there are 2 major issues to handle:
Huge number of stocks in the market.
Large amount of information available per stock.
Considering these issues, most successful investors take a step-by-step approach.
Identify the industry that is performing
Identifying the stock might be difficult, but identifying the industry might not be a tough task. For example, the current pandemic has led to a rise in pharma sector. Companies in the pharma sector are working on vaccine, manufacturing sanitizers, masks. This is leading to trust from investors. This, in turn leads to rise in industry average price.
Some of the industry types traced are as below:
Banking
Healthcare
Automobile
IT sector
Insurance
Identify the target companies
Now that the industry is clear, the next step is to identify the target company. Identifying target company does not mean the famous companies. Tips to identify a good company are:
Understand its strategy (Source: News Channel, News Apps, Company website)
Check the upcoming initiatives and assess its impact.
If it's a new company, look for the promoters and assess their profiles.
Assess the metrics and track the stock price
Metrics are an investor's helping hands while making a buy or sell decision. They give a picture of the critical decisions that the company has made and how have those decisions impacted its stock price.
Internet is flooded with hundreds of different ratios. But what's more important than the ratios is the how you prioritize them. Prioritizing ratios is not same for all stocks. A mixture of knowledge, experience and common sense is what is required to prepare that sheet. We have detailed sessions on this particular as part of our Financial Trading Course.
Identify the right moment to invest
To identify the same, we need to assess the stock in terms of below parameters:
Durability
Valuation
Momentum
Apart from that, we need to do a thorough SWOT analysis of the company.
Once the above tasks are done, the right time comes when we have the most favourable conditions. For more information on how to prioritize the values in order to take the correct judgement, opt for the Financial Trading Course.
Invest & Observe
For an investor, observing the stock is a mandate before investing in it. It is even more critical for the investor to observe the stock movement and the movement of the above pointers after investing in it.
Investing in stocks is a long term process. It is a combination of knowledge and timing. The key to a profitable investment journey is knowing the answer to "Where to invest" and "When to invest"
Conclusion
Here we conclude a basic overview of how to invest in stocks by following a step by step approach.
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