Looking to pick up some stocks this Dhanteras but don’t know how? Here are some simple rules that will help you pick the right stock.
But before anything else, let’s tell you what the Muhurat trading date and timings are for 2018.
The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) will have the Muhurat Trading for stocks on Wednesday, November 7, 2018. The trading sessions for both exchanges on that day will be between 5:30 PM and 6:30 PM. For those in the dark, Diwali is considered an auspicious time to invest. So, even though it is a holiday for the stock exchanges, they remain open for a short period of time on Diwali to enable people to invest their hard-earned money on an auspicious day. Isn’t that a good thing?
For those that would rather invest in Mutual Funds today, click here.
For those out there who think the stock markets are worth a shot but don’t know how to go about investing in them, just keep reading.
Additional Reading: Mutual Funds Versus Shares
The first point to keep in mind is to not get perturbed by the complicated terms used by financial experts. The truth is that stock investing is all about common sense. You just need to collect information on the stocks that you would like to invest in and analyse them to make a decision on whether to invest. Here’s how to pick the right stocks.
Additional Reading: Your First Steps To Investing In The Stock Market
Shortlist firms – Before investing in stocks, remember that the stocks space is huge and you need to have a list in hand before you start your research. Think about what kind of stocks you would like in your portfolio based on your risk appetite. Large-cap stocks have lower volatility and so do pharma and food stocks. If you have a low-risk appetite, you can go for mid-cap stocks. If you choose to invest in small-cap stocks, remember that they are highly risky and you might need to seek expert advice before investing in these.
Get financial and other information – Check if the company has been in the news recently. Was it for positive or negative reasons? This will help you filter out the bad ones. Then download financial statements of the firm. You will need to look at the profits/losses that the firm has been making, the debt it carries (high debt is risky unless the business requires it) and whether its cash flow has been healthy.
Check dividend payouts – Here, it is important to look at the dividend payout ratio, that is, the percentage of income that a company pays out as dividend. A very high ratio isn’t always good as it may not be sustainable in the long run. A stable ratio over the years, even if it is low, is a good sign.
Additional Reading: What Really Affects The Stock Market
Compare with competitors – Check how the firm has been doing compared to its competitors. For manufacturing firms, the points to compare would be its sales, profits and inventory levels. For service firms, you could look at revenues and cash flow. Search to see if you can find the company’s market share in the industry that it is in. You could use the top firm in the sector as a benchmark to make things easier.
Read reviews on the firm – You will find that a number of people have an opinion on every stock. Read reviews online and in magazines and newspapers. You can read analyst reports to see what experts have to say about the stock. Also, read about its historical prices and look for 52-week highs and lows.
It is not easy for a novice investor to pick stocks on their own. Ideally, you should start investing by getting financial advice from an expert and then progress to investing on your own once you gain some knowledge and have remained invested for 2 or more years.
If you’d like to take baby steps with respect to investing, then Mutual Funds are a good place to start. Go ahead, pick up some this Diwali.