4 Steps To Picking A Share : Share Market Tips For Beginners

        We were already talked about Basics of stocks in last article. Now i am here again with some in death knowledge about share market and 4 Steps To Picking A Share : Share Market Tips For Beginners. This is definitely help you to find your initial shares which can give you good return.

4 Steps To Picking A Share : Share Market Tips For Beginners
4 Steps To Picking A Share : Share Market Tips For Beginners

        For a Beginner it's always important to get knowledge about share market. So try to maximize your effort and time to get knowledge and apply them to pick your initial shares. Then after you can make your strategies and buy shares according to them. Basically there are lots of ways to buy stocks. Which may help you generate huge wealth. To find them you must actively have a look on stock market.

        Every investor want to maximize their money as much as possible using stock market. But every one can't do that. Here comes the factor intent. Different types of people have different intent. Some of them who are younger mostly like to take risk and try to maximize their portfolio where as some of them(mostly older) are interested in safe and risk free investing. But there are another type of investors who are intrested in regular income. So your intent will decides your return(profit or loss). We can't tell what to do or not but we can help you to find how to do.

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Some important things consider before any investment :

         Some basic things you must have to know before doing any type of investment. These steps will help you in share market.

• Prevention of loss Capital

• Well research

• Knowledge about basic terms

• Risk appetite

• Never borrow to invest in shares

• Don't believe rumours 

         All these things doesn't let you down or lost you capital. It may take time to build your wealth but as time goes on your wealth also increase gradually. It's only the matter of time.

4 Steps To Picking A Share : Share Market Tips For Beginners
Share market basics

Some terms you must know in share market :

          There are lots of technical terms which you will hear repeated time in future. So it's better to know about them.

• STOCK VOLATILITY : Prices of shares changes continuously(fluctuate). This is due to the demand of stock. Higher the demand, higher the price and vice versa. The VOLATILITY of market changes on daily basis.

• DIVIDENDS : As we all know when we buy some shares of a company we are also become owners of the company. When companies make profit then some companies use them for expansion or increase their production but there are some companies who are share the profit in between investors. Which also known as Dividends. This is the primary income source for longterm investors.

• MARKET CAPITALIZATION : Basically companies issue some shares in exchange of investment when they listed in share market. Different companies issues different number of share. Simply MARKET CAPITALIZATION is multiplication of the stock price and total number of shares issued by companies. E.g. Let a company share price is Rs.100 and shares issued by the company are 10,00,000. Then the total MARKET CAPITALIZATION of the company is 100×10,00,000 = 10,00,00,000.

• SHORT-SELLING : An investor always looking for profit either the market is high or low. SHORT-SELLING is helping investors while the price of the share decreases. When we think or look share price of some company will decrease then we can sell them at the existing price then when the price of the share decrease buy the same share at lower price. This type of selling is known as SHORT-SELLING. Investors making money by using this method while market is low. But this one is a risky move.

• BULL AND BEAR MARKETS : These terms reflect the share market position. Share market is high then it is known as Bull market but when share market is down it is known as Bear market. Basically it prefers the attacking methods of the both animals. Bull always try to thrusts its horns up into the air where as Bear always swipes his paws down.

4 Steps To Picking A Share :

1. Understand the Business :

         Investing in company shares which means you are now a partial owner of that company. So before investing in any company you must know about their business and business model. Because you never want to loose your money. It's ok if you are not a expert in that business but can understand the business. So you can easily figure out what is the future of the company. Without knowing the business you can't even know what the company actually do? Then there is no point to invest in such companies even after that was a multibagger stock. Remember this.

2. Understand the numbers of company :

         There are lots of story behind the company results(numbers). They will definitely show the company is a multibagger or not. They also reflect the performance of the company over the year using those you can easily guess the future also. Basically when analysing any share always have an eye on some important numbers as a investor are assets turnover ratio,it should be improving, Debt equity ratio must be below 1, Sales and profit,both must be 10% or greater ,a gross margin of 25% or above, return on equity of 20%etc. All of them can reflect the company performance. Using those data you can easily trace their past performance and growth. Demand of the product, increase in cash flow, popularity of brand also preferred. Some basic stats but not mandatory :

  •  Growth in sales and profit of the company by ~10%.
  •   A market capitalization of more than Rs. 500 crore.
  •  A P/E Ratio of less than 25.

         Numbers can define a stock very well. All the numbers indicate where should be the company after next 5 or 10 years. You just have to check them carefully and find your best shares.

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3. Try to find undervalued stocks :

       Undervalued stocks means the stocks which may better price while comparing to existing value. These types of shares give you more return with comparison to any other stocks. So it's important to find them and invest in them. As an example we can consider Rakesh jhunjhunwala's Titan share which was proved as multibagger stock. So basically find them using the past performances of companies. I know it takes lots of time but try to choose quality over quantity. Which will definitely help you in future and help you to grow your wealth rapidly.

           One more thing never buy a share which you thing overvalued according to existing price. Definitely these types of share are never do good in future. So follow some ratios which may help you in finding a company shares are undervalued or overvalued.

• Price-to-earning Ratio : The PE ratio is the ratio in between share price and its earnings per share over the past year. Investors can best price when the PE ratio under 25.

• Price-to-sales ratio : This is the ratio in between company's market capitalization and company's sales for the previous 12 months. If a PS ratio value is less than 1 then the share is undervalued. But more than 4 of PS ratio is not favourable. Anything inbetween 1-3 PS ratio is average.

• Dividend yield : Basically this is the ratio inbetween Annual dividends per share and price per share. Anything inbetween 2% to 6% is favourable for investors.

4. Diversify portfolio :

             Using upper methods you can now easily figure out the best of best. Definitely they gonna make you wealthier. But we know share market is unpredictable so our main motive should be never lost our investment. After doing Lot's of homework and analysis we can't ever depend on one company or one sector. Due to some reason if the company or sector don't perform well then it's a nightmare for us. So the best solution is to diversify your portfolio. Diversification can save us from the loss even able to give profit sometimes. Diversify means investing in different sectors at a time. It's may not be more profitable but never let us loose our money. So always invest in different types of companies to avoid any loss or loss of initial fund. Sectors like Pharmacy, Finance, IT, Banking are all time favorite sectors for investors. 


          A strict Warning before you can conclude anything. I can only give you a basic knowledge and suggest to look all those given things before invest in any company shares. We all know stock market is unpredictable and uncontrollable so we can't guarantee anything. But most of the time all these analysis or research can help you find your multibagger stocks which can make you more profit. Companies like Infosys never fall. So there are lots of companies which are undervalued as well as profitable. Follow all those steps to get your best shares. 

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