Sir,
How to pick a stock in the stock market is one of the biggest questions for all investors. Because to get great profit you have to invest in a great company for that you have to buy stock of that best company from the stock market. So, some question which frequently asked by investors are:
How to invest in the stock market
Best time to buy stocks to earn great profit
Which are better Mutual funds or Stock market?
But the question on which today we going to focus is what is the best way to pick the best stock because best time is not the big issue if you know how to analyze the best stock in this market. As you know that this market is full of stocks and the way to earn is only depends on which stock is chosen by you. So, if you are beginner then also and if you are an expert then also it is important to understand how to buy stock or pick a stock in the stock market. Now you first have to understand about value investing.
What Is Value Investing?
In very very simple language if you want to understand what is value investing then I simply say a way to buy things in low cost meaning if you able to buy 1$ item in 0.50 cents then you do value bargain, similarly in investing if you want to buy any stock and able to buy this stock at a lower price then successful in value investing. All successful investors say that if you able to do value investing means if you able to buy high price stock at a low price then you able to get great profit very soon. If you are a new investor then also you easily understand this term and it sounds very interesting if you focus then value investing just like to compare the previous price to current price and you confirm that price of this stock will increase in future.
NOTE: Value investing is important for all investors because everyone wants to buy the stock at less price but if you are short term investor then this is very risky because to understand why the price is falling down and how much time this company takes to increase profit is very difficult.
How To Do Value Investing.
Now as you know that buy the shares at its lowest price but not in loss is known as value investing but how can you buy means how to do value investing because it is stock not any item of a simple market.
For Example: As you buy any time than before buy, you must check the quality of that product, simply this rule is used in stocks also. Just say that if you visit a store and wants to buy a shirt and if shopkeeper says that the cost of the shirt is 1000$ then how you check that the price is right or wrong.
then the answer is just by seeing the quality of that shirt, look of the shirt, similarly, in the stock market, you must have to see the quality of that company to buy stock of that company.
How To Check The Quality of Stock.
The questionaries that how to measure the quality of that stock, if you not able to judge the correct quality of that stock then how can you able to detect the correct price of that stock. In general, we see the price of a stock and how much this stock goes up and how much goes down.
The first thing which you have to do just neglect the price of stock because price always comes in last, so, first try to see the quality of stock or quality of that company means how much the fundamentals of that company is strong. Because you also know that you never buy a shirt just because the price is reasonable. What if the price is good but the quality of stock is not profitable.
Many times people buy a stock just see that the stock having a price of 200$ at 2 months ago but now the price of that stock is 150 $ then lots of people say that stock price is less and now this is best to buy. They don't just think that why the price goes down.
please remember - If you going to buy stock then the price never matters only one thing is matter and that is why the price of that stock increase or decrease and what is the future of that company and his stock.
Then one another point comes in front and that is if you want to buy stock then what is the current price of that stock and what is the previous price of this stock means to try to understand that if the price of the stock is increasing then what is the region many time prices of stock is continuously increasing and investor think that this stock is continuous increase in future also and buy it but met with a very big and unpredictable loss because the price of stock is increasing due to Fraud in market
What Must Do Before Buy a Stock
You must have to do 5 type of analysis of the market before buying any stock
1. Industry Analysis.
2. Business Model Analysis.
Secondly, you have to check what is a business model in a simple way this analysis helps you to understand the lifespan of the market of this company means this how long this company able to survive in front of there competition ( for long-term investors). In this analysis you have to check whether this company is caught in any fraud or not, what is the track record of that company and in which customer satisfaction this company is perfect, what is the model and how this company get revenue means B2B or B2C, what is the future plan of company, capacity of company to earn in year and the capacity to earn in months and according to earning capacity check the shares price of that company.
3. Management Analysis and Plans.
now you have to see the management plan of that company how this company manages there revenue all this you get this in the annual report of that company.
4. Valuation Analysis.
In this part, you have to see how much the selling margin of that company and due to that how much this company is able to earn and also try to see the sells and profit margin of there competitors and with that you able to understand the profit rate of that company and how much profit is increasing in coming days for that company and which company is better in making profit then that company in same sector.
5. Behavioral Analysis.
Means you not going to buy shares of that company due to any attachment never buy any stock just because of you like that company or any other attachment.
Tips For Buy Best Stocks.
1. This is just a general study of stock or company always try to follow all above factor in very deep all above factor is very important in terms of long term and short term both.
2. Must buy a stock to sell it if you think it to sell stock on that particular time then must sell that on that particular time because many people attach with that company but remember always buy shares to sell.
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