X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Women's Weekly: 7 tips for investing in stocks - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 6, 2009

    Women's Weekly: 7 tips for investing in stocks

    Investment experts always advise investors to stay away from 'junk' stocks. Warren Buffet once famously said "The only time to buy these (junk stocks) is on a day with no 'Y' in it."

    Stocks can be as tricky a business for novice investors as they are for seasoned players. However, as Warren Buffet has always propagated, 'Right stocks at the right price' is the way to laugh your way to the bank. This means, avoiding all those 'junk' stocks and setting your sights only on the 'right ones'.

    So how do we really separate the wheat from the chaff? In an age where Satyam and Infosys both ruled the roost at one point of time, how do we know which ones are the black sheep and which ones are not?

    In this issue of women's weekly, we bring to you the fundamentals of choosing a stock from a long-term perspective:

  • Sound management

    A sound management is like a captain of a ship. The onus of charting out the right direction in still waters and steering the company safely in troubled times lies on the management.

    We would even go to the extent of saying that the way in which a management behaves, determines to a great extent, the long term success of the business. You don't want to be an investor in a company where the management takes money from the shareholders to fill its own pockets.

    A case in point here would be Satyam. It promised its investors the moon. However, they soon had to settle for sleepless nights as the ugly truth of Satyam reared its head.

  • Investor mentality

    Traders routinely buy and sell the same stocks within a time frame of a few hours. 'Investors', on the other hand, put money in stocks and hold on for a longer period of time, generally at least 2 to 3 years.

    Develop an investor mentality. Adopt a long-term investment strategy. While looking at the quarterly results of the company, don't lose sight of the bigger picture. Invest for a longer duration which promises more returns and is not affected by daily market fluctuations.

    Research shows that the shorter the duration of investment, the more are the chances of losing money. While, with long term investing, the chances of losing money are lesser.

    Remember, the longer the investment period, the greater are the chances of making money.

  • Practical approach

    Emotions need to be kept aside while dealing with stocks. Don't get emotionally attached to your investments. Your aim is to get maximum profits out of your stocks. It's immaterial if this is achieved through selling them, buying them or holding them.

    Just because you are emotionally attached to the stock or just because the little voice inside your heart says, "Give it some time and things will work out just fine", does not mean that you have to hold on to a stock when it is destined to hit its nadir.

  • Consistently Proven track record

    At the end of the day, it's all about numbers. Numbers can tell a story - you should just have an ear attuned to understanding their language. It makes sense to thoroughly investigate the company and its track record.

    Consistency is the key. If the company is good, it will have a consistent performance. Its income statement will show consistent profits. Its annual reports will talk about the consistent dividends doled out. Ideally, the company should have a dividend history over the past 5 years and a dividend payout comparable with its peers.

    In the case of 'growth stocks', the game changes a little. The company may not distribute its' profits as dividends; rather, it would invest the profits back into the venture for future growth. However, all said and done, it should not invest so much that it has to resort to frequent financing from outside. In other words, it should not undertake frequent dilution of equity or raise so much debt that its debt to equity ratio spirals out of control.

    Looking at prior records helps one understand the company's capabilities. It gives an idea, shows a direction, and helps to understand the company's vision and the path ahead.

  • Intensive research

    The golden rule to investing is considering the future growth prospects of the company you are investing in. During the dot-com boom, many investors displayed a herd mentality, investing in companies without any research. The result was the dot-com bust that followed.

    It is important to not only know the company like the back of your hand but also be aware of the external factors influencing the growth of the stock. The overall state of the economy, the factors influencing political and social environment should also be considered while investing.

    Sector growth, the demand supply trend and the competition in the sector also need attention before you decide to invest in a particular stock.

  • Extensive Homework

    If you are a serious investor, you cannot go by intuition alone. You will need to do a lot of homework before zeroing on a particular stock. This should not be difficult. We may be considered impulsive buyers, but we do have our own ways of background research before we make the ultimate buying decision.

    Homework before investing would include reading up about the company you are about to invest in. Reading its annual reports, studying the balance sheet, analyzing its profits, assets and liabilities; reading interviews of the top management, keeping yourself updated about the latest economic policies.

    In short, being the sponge and soaking every piece of news and information related to your investment.

  • Serious follow up

    Keep a constant track of your investments. Regardless of the market condition, whether it is a bear market or a bull market, it is your money that is at the stake. Your hard earned money! You owe it to yourself to ensure that the savings that you have invested are showing a promise and growing.

    It's the last mile that makes the difference in the race. It's not just about the right formula but about the grit to see it through. The grit to emerge as a winner.

    Don't lose steam once you invest. Serious follow up is what will differentiate you from other investors. It will be your secret weapon, your protective armour, the secret charm that will help you make the best of your investments.

    And to help you get started on the right track, we suggest you sign up for The 5 Minute WrapUp (a free resource)

    Over the next few months we plan to cover a range of issues that are important to women and offer solutions for the same. If there is anything in particular that you would like us to cover, write in to us!

     

     

    Equitymaster requests your view! Post a comment on "Women's Weekly: 7 tips for investing in stocks". Click here!

    5 Responses to "Women's Weekly: 7 tips for investing in stocks"

    shankar

    Aug 12, 2009

    If only we stick to the principals of investing, we can make money!The article give the right rules for investing.

    Like 

    Madhu

    Aug 12, 2009

    Very informative and practical tips.

    Like 

    p.l.

    Aug 11, 2009

    very informative article and good suggestions for beginners

    Like 

    vijay

    Aug 10, 2009

    good tips foe an investor

    Like 

    uma ghosh

    Aug 10, 2009

    It's really a very useful article.

    Like 
      
    Equitymaster requests your view! Post a comment on "Women's Weekly: 7 tips for investing in stocks". Click here!
     

    More Views on News

    When to Sell Your Investments (Mutual Fund Corner)

    Oct 1, 2015

    We often hear how important it is to start saving and investing to meet your financial goals, but little is said about selling investments.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
  •  

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    MARKET STATS