Are you an investor and thinking about how to invest money and get a better return?
You have to decide the investment market after knowing about the company and you should work intelligently on investing. If you are worried about losing the money in the stock market, then, know about some of the aspects of the monetary investments.
Major steps that need to follow while selecting the stocks are:-
- Know the fundamentals of the company
To find whether the company is fundamentally strong or not you can know their finances. Below some of the financial ratios and the trend are listed that should be seen while making an investment:-
-ESP (Earnings per Share) is increasing from the last 5 years.
-P/E (Price to Earnings Ratio) is low when compared with other companies in the same field.
-P/B (Price to Book Ratio) in a similar field is low comparison companies.
-Debt to Equity Ratio necessarily to be less than 1 or zero
-ROE (Return on Equity) must be more than 20%.
-P/S (Price to Sales Ratio) preferably is a small value.
-Current Ratio will be more than 1
-Dividend enhancing from the last 5 years
- Well understanding of the Products or services of the company
In that stage, you have to know about the products and services of the necessary company and it should be an unpretentious business. If you knew the products or the services well, then you can make the best decisions on how to invest money in stocks. When choosing the company, you will have to think about the possibility of making a good income in the future of that company.
- Popularity and the good experience of the company
Investors should always look for a company that has good experience of 15-20 years along with the popularity of the products, this type of companies has high growth potential and the power connection applies to these companies. Some companies only exist for a small time period. Therefore, it is essential to invest in those shares of Indian stock which is working for more than fifteen years.
- Low-cost long period competitive benefits
Now, the question comes that does the company has low-priced long-lasting competitive advantages? Do invest in the companies with ‘MOAT’, this is famous by Mr. Warren Buffet. MOAT is deep and wide which is surrounded by a castle, fort or a town that is filled with the water and intended as protection from attack. Some stocks have the same type of MOAT and that is the reason why the competitors find it difficult to defeat them in their sector. Some examples are Cadbury, Colgate, etc.
- The uniqueness of the company from other competitors
You have to find the company’s best strategy of the selling point and also aware of what your competitors are doing and what you are doing differently from them. For example, Maruti has various competitors like Tata Motors, Honda and so on. Its centers can easily be found and you will get its services even in small cities as well. This is the reason people, mostly prefer Maruti.
- Is the company suffering from a huge debt?
Additionally, you have to check all the financial documents of the company when choosing the best business to invest in the stock market. You have not to invest in those companies that have high debts. Instead of reading the annual results just read the financial sheet document which always shows the correct information. Also, look for the company having low NPA (Non-Performing Assets).
- Company’s management should be efficient and eligible
Well, better management of the company helps in reaching it to new heights. Therefore, it is very essential to make a research about the company’s management where you have decided to invest. Firstly, do research on who is running the company and you must know its CEO, CFO, MD, and CIO, their qualifications and the experience? The efficiency of the company is also necessary to be a check on the basis of strategy and goals, length of tenure, financial ratios ROE & ROCE, etc.
- Is the Company over famous and continuously in the news headlines?
Stocks of the companies that always come in the news, people expect good results even after providing better returns the prices of the stock market of such companies lay down. Hence, it is necessary to avoid the buying of stocks from such type of companies for these returns. It is general regular news affects people’s expectations and decisions.
Read More – How to Get out of the Bad Investments?
In the end, you have learned how you can invest in the stock market keeping mind about all the necessary points that we have discussed above. We at Stocks4-U is committed to providing the best company to investment plans for our guide. Get an investment opportunity like never before! Sign up the plan and get access to a repository of top-performing companies in your location and worldwide.