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HOW DO I INVEST MONEY IN THE STOCK MARKET
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Best stock market investing strategies are ones that generate great returns consistently by giving clear answers to three important questions. 1- What to buy? 2-When to buy? 3-When to sell?
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What to Buy?
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• Buy only quality companies. Shortlist companies that have a superior earnings profile i.e., companies that have delivered consistent double-digit growth in both sales and earnings in recent 23 quarters as well as in the last 2-3 years. • Sustainable growth is very important. Companies can boost sales (one-time contract win) and earnings (cutting costs) which might not be sustainable in the long-run. 20% growth is a good number to start with.
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When to Buy?
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• Once you have a prepared a watch list of top quality stocks, your next task is to decide when you would buy them. Stock market courses • While fundamental analysis should dominate your stock selection process, a little bit of technical analysis will help in getting into a stock at the time when the probability of it going up is high. • While long-term sales and earnings growth have been linear, fear and greed of market participants caused price volatility, resulting in periods of stock consolidation and periods of huge price gains.
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When to Sell?
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• When it comes to selling, one must need to have a stop-loss rule in place. This could depend on an investor’s risk appetite. However, if stocks are bought at proper buy points i.e., on breakouts from chart patterns, investors need to cut losses at 8%. Why 8%? • Quality stocks that breakout from proper chart patterns rarely fall more than 8% from their ideal buy points. And if they fall over 8%, it is better to come out of such stocks, because the stock could then go through a period of consolidation and it would be better to deploy your capital in a better opportunity.
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