How to Buy Stocks
21 November 2009, Saturday
Stock market is one of the most attractive platforms that help you to multiply your wealth. A beginner can enter into stock market only with the help of an expert because without prior experience one may not be able to understand the market dynamics. The working mechanism of stock market is very confusing; to get benefited from the market you should be tricky enough to manage according to the market fluctuations. Stock tips are very common these days; you can find stock tips in areas such as websites, newspapers, magazines, chat rooms, etc. Especially free stock tips are dominant everywhere - forums, newsletters, and a wide variety of publications exist exclusively to give stock tips to new investors.
When it comes to stock tips, everyone claim to be an expert. But the concern is that how reliable their tips are? However, not all stocks tips are the same. If you're looking for tips to buy/sell stocks, you should be very careful while considering the advice of experts because everything that you have heard or read may not be truth. Above all, you need to follow your common sense while deciding on a trading or investment decision. IndianMoney.com is one of the leading Stock Tips providers in Indian Stock Market. Our Stock Tips are aimed to help the investors in their investments by showing them the exact trends of stocks and index. IndianMoney.com Stock Tips are generated only after studying all the relevant technical and fundamental information.
Right time to buy stock
What is the right time to buy stocks? Most financial experts agree that the correct time to buy stock is right now. It is absolutely true that over a period of time stock market’s performance chart goes up, as a result the earlier you invest in stock the faster you will start seeing profits. If you wait for the perfect time to invest you will only delay investment and keep yourself of potential profits. If the stock market is doing well when you enter the market, you may prefer to buy less initially as stocks will be more expensive. However, you should invest when you have money and in fact you should invest as soon as you get money. The sooner you invest the faster your investment will grow.
Risks of Stock
Following are the two major risks associated with
- Failure of Company
- Buying an overvalued stock
Failure of Company
The major risk of stocks is that the company you are investing in will fail or will lose at any time. Short term performance of the company is depended on the market sentiments. There is a possibility, you may invest in a company that does not make profit, and when the company does not make profit, you lose money. If you buy a stock for Rs.100 and that company starts to lose its value in the market, fewer investors will purchase the stock again and in fact many investors will begin to sell. The value of your stock will decrease and if you wish to sell your stock you will end up in making loss. But it is better exit from the stock in such conditions.
Buying an overvalued stock
Other major risk is that buying an overvalued stock. Sometimes you might buy a stock that is overvalued. This means that you will buy a stock that initially seems to be good but will ultimately be proven to be valueless. This has happened in the past when hot and expensive stocks have become valueless overnight. Normally, this happens when a company seems to be on the launch of great profits and everyone hurries to buy stocks from them. If you buy a stock at this point, you would end up in paying more for the stock, simply because there's more demand for it. If ultimately the promise of great profits does not come true, then everyone will start selling their stock and stock prices will fall drastically.
Day trading is a method of buying and selling stocks in a hurried manner. The people who start day trading will buy and sell the stocks in the same day. Since the price of a stock may fluctuate dramatically during trading hours one can make profit out of that. The whole point of day trading is to buy a stock and sell it very quickly and gain quick profit. While many newsletters and companies offer investors with day trading stock options, this type of online trading is very expensive and risky. Many traders pay huge money as brokerage fees and other charges in order to try day trading and many borrow money in order to do the same. If an investor loses money in day trading, then, they may wind up in severe debts.
How to buy a good Stock
When it comes to buying stocks, you have to follow certain steps so that you can make profit out of investment.
- Conduct research about the company
- Consider the Advice of a Professional
- Buy stocks only when you trust that Company
Conduct research about the company
Before investing in any stock conduct a reasonable research about the company. In other words we can tell that you should be very clear with all these aspects of the company such as; what is the main business of the company, what the company produces, what are the future plans of the company, etc. Based on this information you should be able predict how successful the company will be in the future. Researching before buying the stock reduces the chances of you will buy a company that is headed for bankruptcy rather than profits.
Consider the Advice of a Professional
As we have mentioned in the beginning there are 1000s of places there you can find stock tips. Your friends may know something about the stock market, your relatives might also know something about the market but you are far more likely to get quality and valuable advice from an adviser rather than an amateur investor. It is always better to consider stock tips providers like IndianMoney.com to get quality research tips.
Buy stocks only when you trust the Company
Those companies that you trust for your everyday needs -- the companies that make your clothing, your car, and other products that you rely on for quality -- are often a good lead for good investments. If you trust the company for the quality and notice that they produce consistently good products, chances are that other people will too. This means that the company's product may keep selling and the chances that you will make money on your investment are good.
Techniques used for Generating Stock Tips
Following are the two major techniques used for Generating Stock Tips. Apart from this there are many other factors that an analyst is considering while analysing the stock.
- Technical Analysis
- Fundamental Analysis
Technical Analysis (TA)
Technical Analysis (TA) as the name suggests is an analysis of financial markets based on data and observations. The principles of technical analysis derive from the observation of financial markets. TA is best arrived by using various methods, strategies and studies. The main objective of TA is to analyse the trend in the market, it also helps in analysing the behavior, resistance and support levels for a particular stock or index. While technicians use various methods and tools, the study of price charts is primary in TA. Technical analysts also widely use indicators, which are characteristically mathematical transformations of price or volume. These indicators help determine whether a stock is trending, and if it is, its price direction.
Fundamental Analysis (FA)
Fundamental analysis is a stock valuation method which depicts the movements of stock prices by analysing the financial and economic data. The fundamental information that is considered for FA include a company's financial reports, and non-financial information such as estimates of growth in sales, growth in profits, industry comparisons, and economy-wide changes, changes in government policies etc. In simple terms fundamental analysis is like conducting a medical examination on a company to see how healthy it is., Factors such as company’s cash flow, earnings, return on equity are considered for Fundamental Analysis.
Technical analysis is often contrasted with fundamental analysis. Fundamental analysis studies the economic factors and its influence in financial markets but technical analysis based on the historical data it gives more importance to the study of price action alone. Some traders use technical and some uses fundamental analysis solely, while others use both types to arrive at a trading decision.