Friday, 8 January 2016

Fundamentals of Investing in the Stock Market !!!

Hello investors and friends,

Hope all of you went through the videos of Warren Buffet and got a feel of how he values and chooses his businesses (Click here to view the post). Many times, it is worthwhile to watch interviews of successful investors to get a practical understanding of how to pick stocks.


Now here are some interesting points with a few lines of my own from my experience. I hope each of you can digest these points and see if you can put into practice.

I call these my Fundamentals of Investing in the Stock Market. Practising these fundamentals is not impossible and I can vouch for that.

I guarantee you that with a small change in attitude, the stock market will not be a gambling zone but an amazing ownership model for all :-)

1) Always understand the business you are getting into. If you do not understand the business, you can never value it. For this, ensure that you read a lot about the management, products, their customers, company presentations, their confidence of the future. All this needs to be well understood before you look at their balance sheets.

2) If the business does well, the stock value will be realized in due time. If a business is good, the daily colour might not be green but the quarterly colour will definitely be evergreen :-) Just hold on to your business with conviction if it is going good. One day or the other people will run to buy it while you sleep in peace.

3) Look at the long term prospects as well. Today a sector which is the future might be trading low. If after point number 1, you know that the business is growing well, you can invest with a long term vision. Then point number 2 follows.

4) Buy low and sell high - Now this is something which almost no one follows. Normally, you will buy when the stock is moving up  and sell when the stock is moving down. Once you learn to value the company, you will buy low and sell high. 

5) It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Basically, this point is for the greedy who want to make quick bucks. It doesnt take time to lose quick bucks in the market friends. Choose solid value companies at a good price and then sleep over it. Forget the daily movements.

6) When buying a stock focus on WHAT will happen and not WHEN it will happen - This doesn't mean that you do not have a vision. You have to have the common sense of when the business will most likely do better, but the WHAT is very very important.

7) Do not buy or sell a stock based on newspaper headline. Use your HEAD instead. It will pay much more.

8) Management is everything - I have posted in all the boards that management is key. If management is not honest and efficient, you should not invest in that counter whatever may be the prospects. So point number 1 is very important.

9) There are 1000s of companies. Don't forget that there are always opportunities at every point of time. What I am trying to say is that it is worth to spend time studying the counters and then investing. Don't think that you will miss a chance while studying.

10) One of my favourite points - Don't look at the markets but at the individual companies.

Wish you all the very best my friends.. 


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Good luck,
Fundamental Investor

4 comments:

  1. Great article Sir.....

    God Bless .....

    ReplyDelete
  2. Those who learn stock market behavior are aware that stock market is controlled by trends and hope more than substance. An ample evidence for this fact could be seen during the latter part of the last week when stock market indices in both European and Asian countries soared to new heights.
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    ReplyDelete

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Our aim should be to learn and share the art of investing in the Indian Stock market. With right perspective, understanding of stock market basics and a sound attitude, we can all identify Multibaggers and evolve towards Wealth Creation. Are you ready to own businesses? Welcome aboard !!! Lets learn, serve and grow together !!! 
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