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Stock Investment Strategies

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  • August 27, 2021
Stock investment strategy

Stock Investment Strategies

You probably might have many investment queries if you are new to the stock market. What is the best stock to buy today? When should I buy it? Why should I buy it? You may have so many similar questions. 

This article will help you pick out some of the best investment strategies for your stock market investment.

Following are some of the widely used and time-tested strategies for investing in stocks:

1)   Value investing:

This is the most common strategy for wealth appreciation. When you look at the likes of Warren Buffet and Radhakishan S Damani, they are value investors who made their billions investing via value stock investment strategy. In this strategy, you do not buy a share but you buy a business. You only invest in a business that has an under-valued share and has delivered consistent performance.

It’s called value investing strategy because herein your focus isn’t on the share but the value-generation prospect of a company. The focus is on planning a few years in advance by choosing the market leaders of the future. 

2)   Know the company:

Most new investors in the market look for the best stock to buy today. However, the market is a volatile place. What sells today may not work tomorrow. Therefore, it is always better to not focus on the best stock to buy today, but on a company with a bright future. You should look deep into a company’s track records. How did the last three years look? Is the debt going up? Is the equity performing? Are there any legal coups?

These are all questions that will help you understand the company better. Make sure to choose a company that has been undervalued in the market’s current cycle but holds potential for the future.

3)   Don’t scatter your eggs:

Stock market investors often swear by diversification to avoid risks. But we believe that with equities, risk is inevitable regardless of how safe a stock may seem. People still invest in the stock market. Why? Because there are huge profits as well. Diversification can provide a safety cushion, but it will also prevent huge profits. They say never put all your eggs in one basket, but if it is a well-threaded, power-locked basket, we ask why not? You can pick the right equities that match your portfolio, goals, and tolerance. It is better to invest in a few select names than 40 names you are not fully familiar with.

4)   Buy and hold:

Having a practical timeline for your investment should be your main focus. Many people buy quality stocks but expect too much out of them. When the money does not quadruple in a month, they end up abdicating the investment and withdrawing every single penny, only to find out later that it was a good stock. If you have purchased something, be patient with it and give it a try for the long term. Equities are likely to perform over years, and that’s why investors are discouraged from buying and selling fast.

5)   Practice caution:

While buying and holding the stocks in your portfolio is the advice for most shares, do keep in mind that a company’s performance can take a hit over the years. What this means is unforeseen developments can push a company towards decline. A once profitable stock can become a loss. This is why it is a good investment strategy to not neglect your portfolio and to keep in touch with the actuals of the companies you have.

6)   Trust your tracks:

And of all things said and done, time is the best teacher. With your intuition and stint in the market, you will pick up lessons on what works for you. Start low and be vigilant and with time you’ll be able to see real value generation. You will create a bouquet of securities and funds that perform well. Experience, after all, is the best stock market guide!

FAQs 

1)   What is the best stock to buy today?
There is no such thing as the best stock to buy today because the stock market is never steady. A stock that has climbed today may fall tomorrow. So, investors could shift focus to shares that are reasonably priced and offer sustainability.

2)   Is trading the same as investing?
No, when you invest you are looking at shares that have long-term prospects. However, when you trade, you often short-sell and long-sell. Trading also requires buying shares, though it is a short-term hold compared to buying and holding strategies.

3)   How can I assess if a stock is good?
There are various parameters. Look into what the company does. You should conduct thorough research on their financials, leadership, and more. Look for buzzwords like PAT, EBITDA, revenue, among others. Moreover, if a share is “aggressively priced” at the moment, it’s likely to “correct”, so, you’ll get a better chance to purchase the same number of units at a much lower price in the future. If a share is “under-valued”, it’s your golden opportunity to buy and stock up for the long haul.

4)   Where can I start stock market investments?
Nowadays, one doesn’t have to buy physical shares, and investors can simply use brokerage apps to make their investments. TradeSmart is one such platform that allows you a place to gather more information, skim through many options for investments, and also invest – all in one place. Get started by creating an account with TradeSmart and register your Demat account.

5)   How can I make an investment strategy for myself?
A stock market investment strategy comprises your financial goals and risk tolerance. Once you have mapped both, you need to pick the right equities. TradeSmart’s intuitive platform can help you by assessing your needs and wants to make a basket of shares that serve you best.

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