Information is key to success in the stock market. The Stock Market has thousand
ID: 2439567 • Letter: I
Question
Information is key to success in the stock market. The Stock Market has thousands of possible stocks to buy. Your assignment is to find one stock to discuss. When mentioning the stock, there are a few things to mention: The company name, stock symbol and what sector of the economy it is in. What does the company do? What is the stock price, how much has the price risen or fallen in the past year, what is the earnings per share ($ value), what is the price/earnings ratio? You will not receive full credit without this information, which is easily found through a google search or finance.yahoo.com website.
When you reply to other posts, you should discuss future trends and projections for that company OR that industry (sector of the economy). You could also mention the details of the similar competitive stock. (For instance, if one student writes about FORD, a reply might involve TOYOTA)
Explanation / Answer
5 golden rules of investing in stock markets
The lure of big money has always thrown investors into the lap of stock markets. However, making money in equities is not easy. It not only requires oodles of patience and discipline, but also a great deal of research and a sound understanding of the market, among others.
Added to this is the fact that stock market volatility in the last few years has left investors in a state of confusion. They are in a dilemma whether to invest, hold or sell in such a scenario.
1. Avoid the herd mentality
The typical buyer's decision is usually heavily influenced by the actions of his acquaintances, neighbours or relatives. Thus, if everybody around is investing in a particular stock, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run.
No need to say that you should always avoid having the herd mentality if you don't want to lose your hard-earned money in stock markets. The world's greatest investor Warren Buffett was surely not wrong when he said, "Be fearful when others are greedy, and be greedy when others are fearful!"
2. Take informed decision
Proper research should always be undertaken before investing in stocks. But that is rarely done. Investors generally go by the name of a company or the industry they belong to. This is, however, not the right way of putting one's money into the stock market.
3.Do not let emotions cloud your judgement
Many investors have been losing money in stock markets due to their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time. "This leads them to speculate, buy shares of unknown companies or create heavy positions in the futures segment without really understanding the risks involved," says Kapur.
Instead of creating wealth, these investors thus burn their fingers very badly the moment the sentiment in the market reverses. In a bear market, on the other hand, investors panic and sell their shares at rock-bottom prices. Thus, fear and greed are the worst emotions to feel when investing, and it is better not to be guided by them.
4.Invest only your surplus funds
If you want to take risk in a volatile market like this, then see whether you have surplus funds which you can afford to lose. It is not necessary that you will lose money in the present scenario. You investments can give you huge gains too in the months to come.
But no one can be hundred percent sure. That is why you will have to take risk. No need to say that invest only if you are flush with surplus funds.
5. Monitor rigorously
We are living in a global village. Any important event happening in any part of the world has an impact on our financial markets. Hence we need to constantly monitor our portfolio and keep affecting the desired changes in it.
If you can't review your portfolio due to time constraint or lack of knowledge, then you should take the help of a good financial planner or someone who is capable of doing that. "If you can't even do that, then stock investing is not for you. Better put your money in safe or less-risky instruments," advises Kapur.