Skip to main content

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.



Popular posts from this blog

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 moreEarning 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 assetsDividend 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 company will do with its earnings, either it distribute to it…

PE ratio and Its analysis

Introduction:-  PE ratio also known as Price to Earning ratio and is the most popular ratio among the investors. They use this to identify undervalued or overvalued stocks. By using it investors enhance the area of margin of safety and secure their investment. How to calculate PE ratio? PE ratio = market value per share / EPS(earning per share) Examples of calculationAssume:- Market value per share = 40 EPS (earning per share) = 12 PE ratio = 40/12 = 3.5 Market value per share = 40 Earning per share = 5 PE ratio = 40/5 = 8 Best beginners book on share market

How to use it? Or PE ratio using tips:- Lower PE ratio is better than higher PE ratio for selection of stock because low PE mean high earning per share and high PE mean low earning per share. And we need high earning per share.Stock/share’s PE ratio compare with other same industry’s PE ratio. If both companies market cap nearly same then better to compare.Compare Company’s PE ratio with nifty and sensex PE ratio. First:- take the average o…

Kinds of Shares

Kinds of SharesMost of the investors didn’t concern in which type of share they were investing and because of that sometime they ends in wrong place. It is best for every investor to know about all type of shares because different shares are subject to different risks. Every investor can tolerate different level of risk and by knowing that they can chose according to their risk potential.
The Share-capital of a company limited by shares, formed after the commencement of the companies Act, 1956 or issued thereafter consists of two kinds of shares: Preference shares:- Such shares enjoy preferential rights like payment of dividend at a fixed rate during the life of the company, and  the return of capital on winding up of the company. Normally preference share holders do not enjoy voting rights like equity (common share) holders but they have voting right in distinguish circumstances. Read MoreEquity Shares (also known as ordinary shares):- It’s a very common form of shares and first choice…