The stock market is an investment avenue where huge returns can be made. Individuals save their money and invest in the market in the hope of making good returns and wealth in the long term. Investing in the stock market is an art. If it is done correctly you can make massive gains. The sky is the limit when it comes to making profits in the stock market. In this article, we will help you in learning how to pick winning stocks for Beginners in the share market.
Let us begin by learning what is investing in the stock market?
What is investing in the Stock Market?
Investing in the stock market is about purchasing stocks and holding them for the long term. The formula for investing is picking stocks that have the potential to grow and multiply your capital. The stocks in your portfolio can give you two major types of returns. One in the form of dividend income and another is in the form of capital appreciation. Therefore, investment in the stock market must be done in stocks after careful analysis and research.
For investing in the stocks for the long term there are few things that you must know and learn. In this segment of the article, we will list down a few points that you must consider before purchasing stocks for the long term.
#1 Learn Financial Statements
Financial statements represent the financial health of a company. By carefully studying the books of the company, you can know whether the fundamentals of the company are strong. Reading the income statement, cash flow statement, and balance sheet are important before making a selection of any stock for long term investment.
#2 Do Financial Ratio Analysis
Along with reading the financial statements, you must know reading the financial ratios of the companies as well. The financial ratio analysis will simplify the financial statement and helps you in evaluating the company’s performance in a much better way. There are many financial ratios that you can analyze but a few important of them are as follows solvency ratios, efficiency ratios, profitability ratios, valuation ratios, and liquidity ratios.
#3 Value vs. Price
While investing in any stock you must compare the value of the stock versus the price at which you are getting it. There are different approaches through which you can find the intrinsic value of a company like PE Ratio valuation, relative valuation, cash flow model, dividend discount model, etc. By learning the various valuation techniques you will be able to carry out the actual valuation of a company.
#4 Fundamental & Technical Analysis
Fundamental and technical analysis are important aspects of the share market. Fundamental analysis is good for long term investors and technical analysis for intraday trading in the stock market. However, the technical analysis can be useful for long term analysis as well. Investors can use both fundamental and technical analyses for investing in the stock market.
#5 Finding Winning Stocks To Invest
To find winning stocks you must perform both qualitative and quantitative analysis of companies. By doing so you will be able to find fundamentally strong companies. The first thing that you must do is to shortlist a few good companies and check their quality by fundamental analysis. By doing so you will be able to know what to buy, when to buy and when to sell.
Let us now learn about some tips for beginners in the market.
Tips to Pick Winning Stocks for Beginners
The below tips will help beginners with investing in the stock market.
- The best time is to start investing in the market is now.
- Do not let the media scare you with their views. Focus on your research and ideas.
- Focus on saving for investing in the market.
- The best investment strategy is investing with set goals and objectives.
- Depending upon your investment goals, determine the time horizon of your investments.
- Understand your risk-taking ability. Accordingly, make investments and monitor them regularly. You can even use a stop-loss strategy.
- Start your stock market journey by investing in large-cap stocks because they provide more safety to your capital.
- Make sure that your cost of investment is low. Often higher brokerage fees eat returns on your investment.
- Always ask for help whenever you need it in the stock market. Taking the help of an expert will help you in picking the right stocks and building a healthy portfolio.
- Keep your focus on long term goals and do not overreact to short term volatility.
The above tips will help beginners to become better investors. How to pick winning stocks, the beginners should enter the market after gaining some knowledge about the stock market. NTA® is one of the leaders in providing stock market education. The beginners can take a course based on their requirements. The course fee is affordable and the expert faculty ensures that the beginners learn the stock market basics well. For any query or further information, you can reach NTA® on the email or phone call.