Saturday, August 27, 2011

How to make money on the stock Market.


How to make money  on the stock Market.


Stocks have the ability to generate higher returns than most other forms of investments.  But those higher returns come with higher risks.  So those of you who have never invested in the market but want to do so now should invest very cautiously. 

Before plunging into the stock market, you also nee to do your homework and acquire a certain amount  of basic  knowledge. You should also learn the “rules of the game” and adopt the right equity investing strategies to suit your individual needs and circumstances. 

Remember that investing in stock market is both an art and a science.  It is scientific because one should go about the entire process very logically – you have to look at fundamentals, analyze figures, calculate ratios, and take into account the impact of a large number of variables.  Thus, you should be willing to commit yourself to research and constant monitoring of your portfolio.  This will help you know when to move in and out of stocks so as to maximize your profits and minimize loss. 

Stock market investing is an art because you have to simultaneously make intricate use of your intuition and judgment and combine it with perfect timing and other such factors.  This skill can never be acquired in a classroom nor learnt from any text book. 

Many people lose money in the stocks markets as they buy stocks about which they have very little or no knowledge or probably because they have not done their homework.   So if you really intend to make money on the stock market, the most important thing to know is how to safeguard your investments.  If you ignore this basic rule, instead of making money you will lose it all.

Someone who is not an expert investor, the most rewarding of investment opportunities are provided by growth companies, in the medium to long term, growth companies are ideal investments because they offer substantial capital appreciation and also a steady increasing annual income in the form of dividends. 

How ever, the biggest challenge is finding such growth companies.  So you may have to regularly read some business newspapers or stock market magazines in order to zero down  on growth companies.  This reading habit will also keep you updated about companies in which you are a stockholder.  Positive news will most likely cause stock prices to rise.  On the contrary, negative news in the media is likely to pull down  stock value of the company.  Here you need to understand the nature of the news and also the impact it is likely to have on the stock prices.  This is important when you make decision about buying, selling or holding on to a stock. 

Until you become a veteran investor, the best strategy is long term investment.  Buy stocks now and hold on to them for three to five years or more.  Also it is best to have a diversified portfolio instead of putting all of your eggs in one basket. 

And most importantly, avoid speculation.  A speculator is someone who goes into a trade expecting to hit a jackpot and make a lot of money from a single trade.  When you are investing in the stock market, don’t be desperate  for big gains.   Go for small and consistent gains on a daily, weekly and monthly basis.  It is amazing how quickly your trading account will build up over time just by making a little bit every week.  This strategy will also enable you to safeguard yourself against big losses.

(Article by Suresh Menon.  -Published in Business Digest August 2011- He is a freelance writer and former Exe.Editor of ‘New Global Indian and business Gujarat’magazine.  He was also special correspondent  at Business Standard and Dalal Street Investment Journal.  He can be contacted at – sureshmenon@india.com).  


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