Picking the winning stock that will provide consistent returns over a longer period of time is difficult in the stock market. Was it smart of you to invest in the stock market instead of those 13 percent Fixed Deposits that were available a few years ago? Since there is no such thing as a risk-free investment, it is packed with it. Stock trading may either make you a master or a slave. You might be a beginner when it comes to stock trading, or you might have a lot of experience.
No wise pilot, no matter how great his talent and expertise, fails to use a checklist, as an American investor and well-known real estate attorney once said. As a result, you can make a checklist before investing in any stock market. The following are a few points to consider when purchasing stocks from either the Primary or Secondary Market.
The job of the business
What are the company’s goods and services? Is the product or service marketable? How does a business generate revenue? Because a large amount of cases, people neglect the company’s actual work and make purchases based on rumors. It is important to comprehend the company’s actual operations. Isn’t it true that everyone in India invested in Satyam Computer Services Limited (SCSL) without even understanding what it does?
The company’s promoters/owners
The CEO and management team play a critical role in determining the company’s course. It’s crucial to know who the company’s founders and shareholders are. Are they brand-new? Do they have some previous work experience? What is the company’s shareholding pattern? Is it a family-owned business or one that is professionally run? In the stock market, these factors are very important. People used to jump into mutual fund investments without even knowing who the top people were.
Profitability is essential
Nepalese investors often rush into investments without first assessing the firm’s ability to generate profit. People used to queue for jobs in the hydropower industry, as well as other new businesses. Finally, they are in a state of panic at this stage. As a result, it’s critical to assess the company’s ability to generate profit and distribute dividends. A business that is losing money will no longer pay out bonuses or dividends.
Company Success in the Past
It’s necessary to look at how the company worked in previous years. So, how did the business fare during the earthquake? Or during the blockade? What was the company’s output like when the economy was good and bad? Their income statement and cash flow statement, as well as their sales and earnings, should be thoroughly scrutinized.
The company’s balance sheet
What is the extent of the company’s liability? Is our stockholders’ equity that or falling? What is the asset status – does it rise over time? What percentage of the company’s inventory, receivables, and payables does it own? That should be looked into ahead of time. And if an investor considers these factors, their investment will not plummet and become a loss no matter where the stock market goes.
Cases of Fraud or Scam
What is the track record of the promoters or owners in question? Was this corporation ever fined or sanctioned by a court or regulatory agency? Had it ever been the subject of any major rumors? That must be understood clearly. Since they have the potential to have a substantial long-term effect.
Debt and the company’s price
The amount of short- and long-term debt held by the company is a key indicator that explains the company’s long-term efficiency. As a result, these aspects should be thoroughly investigated. In the meantime, what is the stock’s value? There are many businesses in the industry that are undervalued – they are worth considering. It’s also crucial to consider overvalued properties, which should be avoided from the outset.
In the stock market, there is still a lot of confusion. You never know when the green lights will fade and turn red, resulting in a huge downfall. Investing in deserving businesses, on the other hand, would never let you down.