We
live in an age of unbridled capitalism, corporatism and privatisation. In such
a scenario, speculation has become the keyword for any organized activity,
especially if it is related to something as lucrative and temperamental as the
stock markets. Throughout the history of this institution, it has endowed men
with alternative phases of prosperity and poverty. Whether it is the historic
1865 cotton stock prices crash in Mumbai, the 1928 crash in the U.S. market or
the more recent deformations, calling the bluff of speculators has always been
tuff for the common investor. Even today, there are several companies in the share market business who regularly pump in huge amount of finances in
the market to better their market standing, launch fake public relations
campaigns based on false propaganda and grossly overprice their stocks.
In order to take in our stride such tactics of corporate
eagles, it is necessary for small time investors and stock traders to analyse the market situation in detail, with the help of tangible facts and proper
professional assistance. Unlike Guajarati’s, Bohras, Khojas and Bhatiyas, other
communities in our social fabric have little experience of volatile market
trading and lack the societal and institutional experience of business. Hence,
for them it becomes especially essential to decide on a strategy and a plan of
action before taking the plunge. It is only after deciding the true value of a
stock can they hope to make an informed investment decision and make hoards of
profit in the long run.
How to Decide the Price of a Stock:
Strategies for Rookies
There are multi typed and multi thronged strategies for
deciding the real value of a stock. Though there is a bewildering multitude,
the general ones enumerated in this article can be considered to be standard.
First among them is the market review and the analysis of the investment
destination’s market standing. While it is relatively easier to gauge the mood
among the investors it can be tricky to estimate the stock offering company’s
financial potential. However, investors can do so by going through the
company’s proclaimed sales turnover and net profit (not gross profit). This
will ensure a balanced decision on the investors’ part, except in times of
sudden market breakdowns and latent but sharp market corrections. Among
connoisseurs of stock market investment, this strategy is considered as the
ground rule for guaranteeing financial profit in the long run.
Another supplementary strategy is to analyse the Earnings
per Share ratio. The ratio is considered as one of the more reliable indicators
of the financial viability of a company and can be relatively easy to
internalise. Those companies who declare a high Earnings per Share ratio
obviously have a sturdy functional state and are more likely to make profits
than those which post low Earnings per Share ratio. However, investors might
want to remind themselves that it is not a sole indicator. Only when it is
supplanted with a careful consideration of other factors can it be a reflective
estimate.
Also important is to understand the debt of the company
offering shares. While borrowing major amounts for operational expansion is an
everyday practice in the production and service industry, the recent busts have
shown us that it is not always done with due diligence and foresight. Often
companies take up huge loans that they find hard to repay without affecting
their real profits. Hence it becomes essential for new investors to get them
informed on the debt situation of the company and estimate its effects on their
investment’s future. Investors also have to take into account the sales and
profits. A long term analysis of both can provide valuable insights into
company’s financial future and investors’ money.
How to Decide the Price of a Stock: The
Encapsulation
If
investors understand and materialize all these strategies into practice, no
stock market deformation can lessen their profits. Following these tactics will
ensure that investors make the right choice as far as stocks are concerned and
ensure heavy returns in the short as well as long term. However, it is also
necessary to recognize that there are still other extra official factors that
operate within a market and a cautious approach is
necessary in all seasons.
The Nifty hits at record high,up 51.20 points at 7842.90. The Sensex is up 179.63 points at 26282.86. About 1772 shares have advanced, 899 shares declined, and 98 shares are unchanged.
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