Skip to main content

Translate

How to invest in the share or stock market?


How to invest in the stock or share market? There are three ways through which you can invest your money in stock market. The sole purpose of investing is making profit, which investing style you adopted didn’t matter until and unless that style is not contrary to law like spreading false news in the market or pump and dump techniques.

There are mainly two ways of investing style which broadly followed in the stock market (i) value investing (ii) growth investing. Except this, here one more investing style is, about this investing style we will talk in the last.
How to invest in the share or stock market
How to invest in the share or stock market?

Value investing:- 

Benjamin Graham known as the father of value investing. Although he never used value investing word. The book “The Intelligent Investor” best known for value investing. if you have taken your investing decision based on analysis of company’s balance sheet, profit and loss statement, cash flow statement and other ratios like P/E, EBITDA, Debt to equity etc. then you are value investor. Value investor because you have taken your decision based on values of that ratios. The best known weapon of value investor is intrinsic value of any given stock. They compare intrinsic value of the stock with the current price ( market price) of the stock and if the intrinsic value is more than current price (market price) then they buy that stock and hold it until and unless market realize real price (near to intrinsic value), if share reach to that value then investor sells that share and book their profit. Value investing is like “buying rupee in paise” or “discount buying.”

Share or stock which intrinsic value more than its current price (market price) then that share known as the undervalued stock. And if intrinsic value is less than current price (market price) then that type of stock is known as the overvalued stock.

Growth investing:-

In growth investing, investor give importance to fundamentals of the company like who is the person behind the company? what are the future objectives of the company and future growth potential of the company? Peter Lynch is best known for his fundamental analysis. As contrary to value investing most of the times stock buying lead to costly buying as compare to value investing or looking on ratios because of its high potential growth. What is the current price of the share? Doesn’t matter for growth investor if company has high future growth potential.

Mix of both style of investing:- 

Warren Buffett need no introduction at least in the world of share market. He is the most successful investor market ever have seen. His investing style is buy undervalued stock with high rate of growth potential, mean companies which are facing trouble now, whatever reason maybe but future of it very bright. For Warren, value and growth investing never been two different kind of investing, if you read his letters then one thing always comes into light that is "buying undervalued stocks of best companies with the expectation that company will grow in future" mean "value investing leads to growth investing", and in that way anyone can understand that “value investing and growth investing are two different sides of same coin.”

Investor never stick themselves only one type of investing style, market always give opportunities and if anyone stick with single type of investing style then it become very difficult to grab these opportunities. Try to avoid common mistakes and read good investing books so that you can make your investment decisions. Be careful and invest your money very wisely.

"GOOD LUCK"

Comments

Popular posts from this blog

My Investments and COVID-19

Everyone has witnessed huge market decline in the month of March when our PM Narendra Modi suddenly announced lockdown to tackle covid pandemic. Sensex stock market index reached all time high of 42273.87 in January of 2020 and from there it fallen down to below 26000 pts, nearly 40 % down. And from there it started healing. My Investments and COVID-19 Before this great fall my all investments were in undervalued stocks with very low P/E multiple, attractive earnings and exciting track record. Thanks to this quality stocks my own portfolio fall nearly 22 %. Although my 22% of capital vanished, I feel very delighted my portfolio beaten the market index(Sensex down nearly 40%) with significant points.  In the last year of your college generally you are not backed with huge capital support, and your capital is very limited. So securing capital is my first priority. Back on the track, I sold all the stocks with 22 % capital loss and secured rest of the principle capital

Why some investors give stocks so high PE?

PE ratio also known as Price to Earning ratio and the most popular ratio among the investors. They use this to identify undervalued or overvalued stocks.  we already covered what is PE ratio and how you can utilize this ratio, if you want to learn about this then simply click here . The very basic logic behind PE is, If earnings low then PE high and If earning high then PE low. In general parlance if stocks PE high then it considered as overvalued and if stock comes with low PE then it considered as undervalued. Generally people avoid investing in stocks with high PE but everything comes with exceptions.  Stocks with high PE means "people and investors are willing to pay high prices for low earning stocks". Why people or investor doing so ? there can be various reason behind this, after all its a stock market and everyone have their own perception. Reasons can vary person to person. There can be various reason for paying high PE stocks and one reason can be,  Investors are ve

Important ratios for stock analysis

Important ratios for stock analysis PE ratio:- PE ratio also known as the price to earning ratio and very famous between the investors. Investors use this ratio with other ratios or data to find out undervalued stocks. Read more Important ratios for stock analysis Earning per share:- In simple meaning it means “distribution of company’s profit between each shares” it can be used as the indicator for determining company’s profitability. It is best to use PE ratio and Earning per share comparatively. Return on Assets:- Is company using its assets effectively to generate income, yes or not? This ratio tells us the truth. This ratio gives us idea about management efficiency or capability to run company profitably. It compares company’s earnings as compare to its assets Dividend payout ratio:- It means “amount of dividends paid to stockholders relative to the amount of total net income of a company” Dividend payout ratio = Dividends / Net Income. Retention Ratio:- What c