Sunday, December 23, 2012

How To Be A Successful Investor In Stocks

When people buy stock of a company, the biggest misconception they have is that they are investing in one of the various investment options available, while the fact is that they are becoming one of the co-owners of the company. This investment option seems so tempting that people often directly take it on without any analysis. However, it takes a lot of effort for professional analysts to carry out fundamental analysis of stocks. This analysis gives an insight into the past performance and future potential of the company.

However, being a successful investor is also not rocket science. It just needs a bit of stock analysis and patience to meet your long term financial goals. To meet your long term financial goals through stock investing, you need to buy the stock at right price, wait for the time for it to appreciate, and then sell it out at the optimum time. Moreover, it pays you dividends along the way. Now the question arises, how do you do that?

Identify the right company to invest in, which will get you enough payback to meet your long term financial goals. This requires a bit of homework. You need to conduct the fundamental analysis of the intended company. Fundamental analysis involves the study of the earnings and growth of the company, its drivers, past performance, and future outlook..

The stock price is market-determined. It rises and falls everyday according to the current market conditions or the daily fluctuations in the economic conditions. However, it is the fundamental health of the company which determines its long term financial prospects. It is not always necessary that companies which perform well financially, also prevail in the news. The job of an analyst involves identifying such companies and looking at the long term performance expectations. Though, this won't guarantee continuous growth or 100% profitability, but such stock analysis will decrease the risk involved.

If we look at the daily price chart of the stock, the trend may indicate a direction. But it is not always advisable to track it daily unless you are a day trader. Stock prices are largely driven by market sentiments, and investor perception. Hence, they do not reflect the true worth of a company's stock. Fundamental analysis helps deduce the intrinsic value or true worth of a company. Apart from that, one should always keep an eye on the business cycle and the impact of competition affecting the company.

To become a successful investor in stocks, one needs to avoid committing some mistakes. One should avoid enthusiasm and not just keep buying the stock blindly. It is always better to first consolidate the position of your stocks before expanding or venturing into other sectors or stocks. Locking your gains will make sure that you are at a lesser risk. Sector analysis is a better way to filter out your trading preference and increase your earning prospects.

A stock's price showing an upward trend on a particular day doesn't mean that the stock will do well in long term too. This is the time, when you need to know the truth through fundamental analysis of the stock.

Wednesday, December 12, 2012

Online Trading Account With Lowest Brokerage

An investor who is new to the stock trading market will need to have an online stock trading account with a stock trading brokerage firm, because it is not easy to understand how and where to invest in a short period of time. Stock traders need to keep a close watch on the stock trading market regularly, gauging the performances of the individual companies as well as the overall sectors the companies belong to. These factors affect the rise and fall of the share prices, and hence the need to know when to buy or sell a stock. This comes as a reliable and convenient way for the investor to make effective decisions regarding his investments in the stock trading market.

An investor will need a demat account with a registered depository participant, which can be a bank or a brokerage firm, and a trading account with the brokerage firm linked to the demat account. The demat account will hold the stocks of the investor in a dematerialized or electronic form, unlike years back when the shares were in the form of physical certificates. The trading account will allow the stock trading, i.e. the buying and selling of stocks with the registered stock broker or dealer. Stock trading in India has grown very popular with more people trying their hands at it. And many of the leading private banks of India like ICICI Bank, IDBI Bank, HDFC Bank, SBI Bank, BOB Bank and Axis Bank are providing for the opening of a demat account and trading account together, along with a savings account.

The service charge rendered by the broker on the investor is known as the brokerage fee. And an investor interested in stock trading should find a broker who levies the lowest brokerage on him. In such a case, the brokerage fee will not eat up his profits, and the purpose of the investor to hire a broker in the very first place will be solved. An investor can choose from the type of brokerage account or broker as per his financial requirements. There are full-service brokers who offer extensive investment advice to their clients, but charge a very high fee for the efforts they put in. But usually, the online brokers are preferred by investors as their need of a secure platform for trading is fulfilled at a relatively lower price. The investor can also choose from various other factors, such as the variety of tradable assets, the tools used for analysis, or the speed of order execution and the extent of margin money, to decide on the type of brokerage account.

Hence the idea of getting an online stock trading account with a brokerage firm turns out to be the best only when it can provide its services with the lowest brokerage fees.