If you have recently entered the stock market and do not have much knowledge about stocks, then this blog post of mine on How to Pick Good Stocks can be very useful. Picking good stocks is a science that comes from continuous study and collection of information.
Before moving ahead let me tell you that this post is only for investors, if you are into trading and want to pick stocks for trading, then this post is not of use to you.
There Are Two Types Of Investors In The Stock Market
Tip walkers – These are those people who after getting extra money from somewhere, first call the person who has opened their demat account or bought the first stock.
The person from whom these people are taking advice may have opened your demat account just for commission of 200-300 rupees, he has no knowledge about share market. Let me tell the tip takers that till date no tip taker has been able to earn money from the share market, the reason behind this will be known in detail some other time.
Serious Investing People- These are the people who take the stock market seriously. And invest in the stock market by choosing the best stocks from you. If you are doing this then it is possible that you can earn good money.
By the way, no one’s opinion should be followed in the matter of stock selection, but since you are a new investor and you do not know the criteria for selecting shares, how the shares move up and down in the stock market, then it is better to take someone’s help in the beginning. cool Beans. You can learn by reading books, you can follow big investors
Even the world’s best investors who have generated consistent returns from the stock market will let you know what they think while picking stocks.
Picking good stocks is a pure science, it becomes an art after years of experience and investors can tell by the name itself what a particular stock is like.
Let us understand how to choose good stocks.
How To Pick Shares
Everyone has their own approach to pick good stocks. Some people see the balance sheet of the company, some people see the vision of the company, some people are interested in the founder of the company and some are interested in the product. But as an investor you should look at everything.
7 Steps That Will Tell You How To Pick Stocks.
1. Fundamentally Strong Stock
While building a portfolio, always choose stocks that are fundamentally strong with a strong balance sheet position. You can check the following points to see whether a stock is fundamentally strong or not
Loan
While choosing a stock, it should be kept in mind that never takes such a stock on which the company has a lot of debt or debt. Because I have experienced myself that debt sinks the business, if you like a stock more than other parameters, but that company has debt, then the reason behind this debt should be understood, has the company expanded itself? Have you done? To do this loan is taken and so once the stock can be taken
Always Look At ROE (Return On Equity)
Return on Equity refers to the return on equity of a particular value made by the company in a financial year. For example, if a company’s ROE is 15%, it means that the company makes a profit of Rs 15 on equity of Rs 100.
Many people get confused that if the company’s return on equity is 30%, it means they will get 30% return. But it is not so, it is just a possibility, the share price in the stock market decides how much return will be received.
Continuous Development
One should always check whether a company is making profits consistently or not. Many such companies will be found which make good profit in the first year and cannot earn even 10% in the second year, many fluctuations are not correct in profit.
In the long term, only that company can give good returns, which is continuously growing, whose profits are continuously increasing.
one of the products. If you analyze the company’s product, you can easily find out where the company will go, whether the company will be able to move forward with this product or not.
2. Business Model
If you have ever thought of doing business and for some reason the bus could not be completed, then the stock market can fulfill your dream.
Here every business model’s company is listed, according to the business you like, you can buy shares of that company and become its owner. That’s why always invest money in this industry about which you know about which you have understanding.
Talking about big investors, they buy shares to say, but their approach is to buy business. If you don’t understand their business model of IT company then don’t invest in it. You understand the auto industry, understand their business, invest in it.
Not every business is scalable, not every product can be sold all over the world. So always choose a company whose service or product is scalable, without that product the world is incomplete.
3. Value Investing
The theory of value investing was first given by Graham Bell, in many of his books he told how value investing can make you rich.
Later this concept was adopted by Graham Bell’s disciple Bill Gates and made it so popular that now all the investors of the world talk about value investing.
In value investing, one has to choose such stocks whose value is running less than expectation. For example, let’s understand that any share whose price should be 100 rupees but due to the ups and downs of the market, it has come to 60 rupees.
4. Future Of The Corporate Sector
The guarantee that any stock will perform well increases with the fact that how the sector of the company will perform in the coming times.
The budget of the Government of India is very useful for which sector will be the best in the coming time, through the budget you can easily find out in which field the government will spend money and what are its projects.
To know about the upcoming market boom and also to know about making money in which sector, by keeping an eye on the news continuously, it starts to be understood.
Sectors That Have Good Growth Potential In The Coming Years
1. Retail Consumer Sector
2. Insurance Sector
3. HEALTH SECTOR
4. FMCG
5. INFRASTRUCTURE
5. Right Price Point
Ramdev Agarwal, one of the biggest investors in India, who is followed by millions of investors, has said many times in his interviews that you can make good wealth only if you buy and sell a Rs.50 share for Rs.10. . When a stock of Rs.50 becomes Rs.200. While a typical investor would get 4x returns, you would get 20x returns on the same stock.
Stocks which are available at a price less than the actual price are called undervalued. If it falls to Rs 100 it doesn’t mean it has become cheap, it should be taken, it may still be expensive, it should be worth Rs 50.
New investors do not understand the price and often get cheated due to which they lose, you should not do this and invest smartly, as an example, suppose someone is getting jeans paint for 1200. 1000 to him the next day, so it has become cheaper. May be its correct price is 600 rupees only. Since you have an understanding of jeans, you can tell by looking at the jeans. Because buying jeans is a rough experience. Things to remember while picking stocks
6. Compare with Peer Company
Before buying the stock of any company its peer companies are analyzed, if you do not know the peer company, then let me tell you that peer is the one who works in the same sector in the same sector, i.e. Competitors like Sun Pharma Airtel’s peer companies are Divis Lab, Cipla Ltd., Lupin, Abbott Airtel’s peer companies are Idea Vodafone, Reliance, Tata Telecom
7. Company should not have legal case fraud case
There are many companies that run a territorial state in their field, their competitors do not have market share at all, they become synonymous with the product, we should always choose the same company, like Asian Paints in Paints, Toothpaste In Colgate, noodles in Maggi. There must be something special that their competitors do not have, this point helps a lot in choosing the stock.
As we have been hearing since childhood that we should stay away from court cases, this also applies in the stock market.
