How to select a good stock

There are so many stocks from so many sectors, so how to pick good stocks for safe investment.

To come to that conclusion, first the investor should have a clarity about the amount he is planning to invest and how long he is going to hold the stock.

Investment can start from a minimum amount also, for beginners it’s advisable to start slow. If investment amount is less then it is advisable to pick a single single stock than diversifying the amount with many stocks. Suppose if an investor can afford only Rs.5000 then it’s better to find a single stock within a price range of Rs. 100 to 500, so that increase in stock price from 100 to 125 results in earning profit of Rs. 1250 ie profit of 25 Percent.

If the investor is planning for a short term investment, then trend of the stock is very important, how is the stock faring right now(This comes under technical analysis which will be discussed in future posts). Because suppose if investor found a stock with good financials and great growth opportunity but the stock is in over bought zone and in the consolidation phase(a period of time where stock price falls to set a balance to the stock price in accordance with original stock value and demand), then investor cannot expect much returns from that in a short time frame.

The next factor to be considered is fundamental analysis of the stock, which comprises revenues, profits, earnings of the company and also it’s management, how well the company handling it’s debt or is it debt free etc etc(all comes under fundamental analysis which will be discussed detailed in future posts). It decides the quality of the stock.

Portfolio is total collection of stocks an Investor holds. Investor should decide size of portfolio, which stocks holds maximum share or minimum share, based on the quality of the stocks. And defining stoploss(exit point after achieved profit or affordable loss) and target(desired percentage of profit) for each stock while adding the stock to portfolio is advisable.

Now coming back to the main point, how to select a good stock, 70% of weightage should be given to the fundamental analysis and 30% to the technical analysis.

Fundamental analysis and Technical analysis will be discussed detailed in future posts.

Disclaimer:

Markets are subject to market risks.Stockvedam don’t advise or endorse any stock. Stock Market investment should be done with investor discretion. Stockvedam is not responsible for any losses incurred by the investor.The content at www.stockvedam.com is for informative purpose. Investor should do his own research while investing in stocks.