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Saturday, August 14, 2010

6. Buy or Sell

Step-6: Buy or Sell

Follow all the steps from 1 to 5 religiously. It will take time but worth doing it. If you do it, you won’t have to see a situation where you loose more than 50% of stock value in a week! Buying or selling will depend on how you stock(s) perform on the above analysis.

Things to remember

• Do not buy or sell stocks just because your friends or relatives are buying or selling them – do your own research using above steps.

• Do not blindly believe what management says about their firm; most of them are always optimistic about their future- avoid being overly optimistic

• Do not buy a stock just because it is trading at its yearly low – the stock price might just drop even further

• Do not buy a stock just because it appears to be glamorous or media covers it regularly; look for fundamentals of the stock, the sector and the company

• Market sentiments affect stock prices to a great extent- even a good stock may not have enough buyers in an uncertain market. Trick is to buy them and hold on for a long period

• Last but not least, do not put all your eggs in the same basket i.e. have proper asset allocation- invest in both stocks and government instruments such as bonds, PPF and PF

Remember there is no short cut to investments in equity market. It is a place where you can make millions while loose all your money in a single day. You should think how hard it is to earn money at the end of the day. We hope you do not want to loose your savings in the market due to your laziness or lack of homework. So, we would request you to do some basic groundwork before investing in stocks. Our model will just help you in doing so.