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How To Make Money From Stocks?

Mr. C.S. Sudheer | Posted On Thursday, December 22,2016, 10:42 AM

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How To Make Money From Stocks?



There is no greater pleasure in life, than making money. One of the best investments to make and earn money really fast? Its stocks of course. Investing in stocks, especially if you don’t understand them, can be very risky. If you don’t do your research and invest in stocks, you will lose money so quickly, you won’t go anywhere near stocks again.

Just 2% of citizens in our country invest in equity. (An investment in equity is equity mutual funds + stocks). Yes…citizens of our country, fear stocks. Why do you and so many of our citizens, fear investing in stocks? A very simple answer….Greed. The greed to make money fast, without knowing the right way to invest in stocks (doing your research), makes you lose money. You are impatient. You want to make money so fast; you don’t give your stocks, time to grow. Stocks are like plants. Just as plants take time to grow and become trees, stocks too… take time to grow in price and make you rich.

Now to the Big Question…..How can you make money from stocks? It’s time to find out. Robert Kiyosaki says, "It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." Want to learn more on investment planning? Just leave a missed call on financial education helpline 02261816111 or just post a request on website. 

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Check the true value of the stock

Your stock is not a piece of paper. It’s part ownership of a Company. Take time to study the Company, whose stocks you plan to buy. How do you do this?

Study the top management of the Company: If the Company has very good leaders…an excellent and highly skilled top management…expect highly motivated employees in the Company. This can only be good for the Company.  The integrity of the top management is very important for the growth of the Company.

Check the prospects of the industry: The growth of the Company, whose stocks you plan to buy, also depends on the prospects of the industry, to which it belongs. If the industry is doing well, most of the time, so will the Company. Of course…The Company needs to have a good top management and should be able to withstand competition.

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How good is the Company vis-à-vis its peers? You need to study the target segment of the Company. This is simple…To whom is the Company selling its products? A toy manufacturer sells toys to children. The target segment….Children. Now children will always force their parents to buy them toys. If the economy is doing well…their parents would earn well and spend a lot of money on toys. The growth prospects of this Company are great. You also need to check the performance of the Company vis-à-vis its peers. (Peers = fellow competitors and other companies in the business).

Check the financial performance of the Company: Take a look at the profits of the Company. What is the return on capital?  Is the Company making money?

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Invest in stocks for the long term

The simple mantra for investing in stocks?

  • Invest regularly in stocks: You can make money from stocks, only if you invest money in stocks. So make sure you are a regular investor in stocks.
  • Stay invested in stocks for the long term: Studies have shown that longer you stay invested in stocks; greater is the chance of making a profit. You should ideally stay invested in stocks for at least 3 to 5 years to give yourself, the best chance of making a profit.

If you are a long term investor in stocks, you don’t have to worry about the daily, weekly or even monthly movement in stocks. A lot of things happen in the stock market each day. News and events….Volatility in Global markets affect the stock market. If you are a long term investor, bad news or global volatility which causes the stock market to crash on a particular day/week/month, should not make you nervous. You concentrate on sound (the long term) rather than noise (short term).

Have control over your stocks 

Learn the difference between gambling and investing. You buy stocks without learning about the Company and the Industry? You don’t do your research? You are gambling…not investing. Check your mental capacity before buying stocks. You are comfortable holding 200 stocks of a Company. But you are greedy to make money fast. You have bought 400 stocks of the Company. If there is a slight fall in the price of the stock, you will panic….get nervous….make mistakes and this would cost you money and peace of mind.

Let’s end this article with the opinion of the great British economist John Keynes…Investing in stocks is like marriage. Ideally, stocks must be held till eternity. You must sell stocks, only if there is a financial emergency. 

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