Buying a stock; Read this First

Common Mistakes which everyone makes

1)      People go by gut feeling: Which is good but does not always work.

2)      Don’t just go by the “TIP”; Analyze the stock.

3)      Always think would you be spending your money in something which you have no idea about.

4)       If you like a stock do check out the related news (www.google.com/finance)

5)      Don’t just buy a stock if it’s fallen on a particular day. Don’t worry it will fall more and again.

6)      Buy a stock at the low price for the year. Every year a stock will touch it’s high and low. Find out the average increase in the Low and High for the past 5 years and buy it when the stock is above 20% (can vary depending on the stock) from the previous year low.

7)      Always bet on a stock which is healthy (one which has constant increase in earnings) and not on one which is unpredictable.

8)      Things to looks for a constant increase in a stock

a.       Earnings Per Share

b.      Return on equity

c.       Return on total capital

d.      Amount of Loan (should not be more than 4 times the Net Profit)

e.      More the cash, better chances for the company to survive.

9)      Always keep money aside for investing in stock

10)   We all make mistakes. There will always be next time.