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This article is going to be very helpful for you, so read this article till the end. Let’s start today’s wonderful article…
Before buying any stock, you need to know which company’s share to buy. Meaning, first of all, you have to do fundamental and technical research and choose your preferred stock.
If you do not know about Fundamental or Technical research, then let us tell you that before buying any stock, we have to
See Many Factors in the Stock Of That Company Like:
How is the company’s business going?
What is the business model of the company and how does the company make money?
How are the people in the management of the company?
How much debt does the company have?
Is he able to pay the same?
After getting listed in the stock market, that is, after the IPO, how much returns has been given to its investors so far?
What competitive advantage does that company have that makes it different from the rest of the companies in that sector?
What are the plans of that company in the future?
You should know the answers to all these questions before buying shares. And when you find the right answers to all these questions, then it comes under doing Fundamental research.
If seen, there are two types of people in the stock market, traders and investors (those who buy shares by doing fundamental analysis are called investors and those who buy shares by doing technical analysis are called traders).
Trading is very risky as compared to investing in which people do intraday trading or swing trading whereas investors invest for the long term.
For example ‘Warren Buffett‘, the richest investor in the stock market.
When to buy shares: – Now let’s come to our main question when to buy shares?
Now that you have selected the stock and you know which share you should take, should you go ahead and buy that share or not?
The answer can only be yes or no, but it depends on a few things,
if you are going to invest in the stock for a long time, then you can buy that share at any time. If the stock is getting at the highest price ever, then wait for it to come down a little and when it comes down a little bit, then buy it immediately.
But keep in mind:- Maybe, no stock may come down…. It kept going up and then later you will have to repent and you feel that if I had bought at that time, it would have made a good return.
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Fundamental Analysis:
That’s why I have already said that you should do the Fundamental analysis of the stock and then take the decision, when you do good research about the company, then you do not have to think much about all these small questions. And a good and sensible investor is also one who invests by looking at the business of the company and not just by looking at the share price or chart.
I have given below some situations when it is good to buy a share…
So let’s know about them.
When the shares are getting at a price less than the intrinsic value:-
Nothing much, just understand that you should always buy undervalued shares i.e. when the price of the share is trading in the market at a price much lower than its actual price.
But undervalued, don’t get caught in penny stocks in the pursuit of buying this cheapest stock because people buy shares priced below Re 1 or less than Rs 10 but later they lose a lot.
That’s why you should neither get stuck in cheap stock nor should think about the stock giving the highest return because in this way you will also get 1000% or 2000% or 5000% returns in the market but these types of shares are as much as Quickly make people millionaires, equally they make you a pauper.
Therefore, if possible, do fundamental research on the stock first and then see if that share is getting at a price less than its intrinsic value or not, if yes, then buy it immediately.
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Looking At The Company’s Quarterly Results:-
You would know that every company listed in the stock market presents its quarterly results every 3 months, in which how much revenue the company has generated and how much has been spent, apart from how much net profit has been made in comparison to the previous quarter, all these things would have been told in it.
You should decide to buy the stock after looking at all these things. You should buy that share only if the company’s quarterly results are good, but if the company’s sales and profits have decreased compared to the previous quarter, then you should not buy the stock.
Apart from this,
Financial Statements:
You must also see the 3 most important Financial statements of the company which are:-
Balance Sheet
Profit and Loss Statement (Income Statement)
Cash Flow Statement
At The Time Of IPO:-
Whenever a company is listed on the stock exchange (NSE or BSE) for the first time in the stock market, it is called an IPO (Initial Public Offering).
Whenever a company wants to increase its business, it brings its IPO to raise money from small investors or the general public. People who buy shares of the company at the time of IPO earn a lot of returns after that stock is listed in a very short time.
The company keeps the share price very low while launching the IPO, if the company is good then people buy that share, and the price of that share increases further. In this way, if you invest money in an IPO, then you earn a good return in a very short time.
You should know that the IPO of most companies comes only in the bull market, that is, when the Nifty goes up, then only new companies bring IPO into the stock market, if you look carefully, then there are few companies in the bear run market IPO in the Stock Market.
Now let’s see the last point now that when should one buy the stock:-
After The Stock Market Crash:-
Some of you might be wondering what the hell is this. Most people sell their portfolios when the market crashes and I am talking about buying.
But there is also a truth that those people earn the most money in the Stock Market.
Those who buy shares at an undervalued price.
Those who buy when no one else buys.
Those who do not rely on the chart of the stock but on the business of the company.
Those who know the reason for the market crash.
Those who know when the market can recover.
One who knows all these things can call him an “Intelligent Investor“.
And I am not saying this only, but the world’s richest and most successful investor Warren Buffet says that
Be Fearful when market is Greedy
Warren Buffet
Be Greedy when the market is Fearful
You must have understood the meaning of this you should invest in the stock market at a time when the whole market is scared because at that time you will get the highest discount and the best companies’ shares at the cheapest price.
So now you must have understood why you should buy shares after a market crash. The best and most practical example of this is
Not once but many times… Like when the market crashed after the 2008 financial crisis, it recovered twice as fast shortly after that and a sane investor knows this
Therefore, you should not panic when there is a downturn in the market, but take advantage of this opportunity.
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