Many investors go about their investing in an irrational way: 1. They are tipped of a 'news'/'rumor' in a 'hot stock' from their broker. 2. They impulsively buy the scrip. 3. And after the purchase wonder why they bought the stock. He is a fool to act in such an irrational manner. We suggest a three-step approach to investing in equities. The moment you get a tip on any stock, get the first hand news immediately. You'll find information on the following sites: The news, if any, will be on the sites. Be it announcements earnings, dividend payoffs, corporate move to buy another company, flight of top management to another company, these sites should be your first stop.
When you enter an order to buy or sell a stock, you will essentially see the “Bid” and “Ask” for a stock and some numbers. What does this mean? The ‘Bid’ is the buyer’s price. It is this price that you need to know when you have to sell a stock. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell. The ‘Ask’ (or offer) is what you need to know when you're buying i.e. this is the rate/ price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted “Ask’ price.
If an investor looks at a computer screen for a quote on the stock of say ABC Ltd, it might look something like this:
What this means is that there is total demand for 40,000 shares of company ABC at Rs 3550 per share. Whereas the supply is only of 20,000 shares, which are available for sale at a price of Rs 3595 per share. The law of demand and supply is a major factor, which will determine which way the stock is headed.
Next time you hear or read a 'hot tip': do some research; try to know all you can about the stock and then shoot your investing power into the stock. With practice, you'll be hitting a bull’s eye more often than not. We recommends investors to be aware of the technical tools of measuring stock performances before investing. Learn to identify the signals that the market emits. The Experts investment guide of this complete guide will help you in this effort. For Stock advice : Saturday watch on Market Outlook | ||||||||||||||||||||
Wednesday, 15 August 2007
Why Invest In Equities?
Do some number crunching. Check out the growth rate of the stock's earnings, as shown in a percentage and analyze those graphs shown on your broker’s site. You will learn to do it later in this complete guide under the module named ‘Technical tutorials’. Learn more about the P/E ratio (price-to-earnings ratio), earning per share (EPS), market capitalization to sales ratio, and projected earnings growth for the next quarter and some historical data, which will tell what the company has done in the past. Get the current status of the stock movement such as real-time quote, average trades per day, total number of shares outstanding, dividend, high and low for the day and for the last 52 weeks. This information should give you an indication of the nature of the company’s performance and stock movement. Also its ideal that you be aware of the following terms:- 