1. Look at the value of the stock instead of the price. Low cost stocks may be low for a reason. Look at the whole picture. Analyse why the price is low and the possibility of rise due to undervaluation.
2. Check the companies return on net worth. This is the profit after taxes divided by the net worth. It is important to see a trend of growing return on net worth.
3. Spread out your risk. You should not put all your money in high risk stocks. Go for some lower risks and some higher risks. Apart from Portfolio diversification,time diversification is also equally important.
4. Understand the basics of stock prices. Prices move up or down depending on future earnings.Stock prices always reflect the future and not the past
5.Make a plan .Before you enter into any stock,decide your target price.Remember the profits made out of the stocks is virtual money.It is very important to convert this virtual money into real money by booking profits as and when your targets are achieved.
6.Secret to wealth creation. Two Golden words -Patience & Discipline.The market can remain irrational longer than you can remain solvent.
1 comments:
Thanks for very very prudent words.I think this would give guidance to millions of new stock market investors.
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