4 Easy Steps To Invest In Stock Market

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Indexes
  1. Business
  2. Management
  3. Financials
  4. Valuation
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People look after certain things while investing. They study many things, research many things, and gain knowledge about many things, and yet they are unable to find the right solution for how to invest, simply and properly.

Many people hire a financial advisor or financial counselor, and yet they are not able to make a clear decision on how to invest properly. Let us see some easy and basic things to look into to invest in a stock.

Business

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The first thing to look into is the business that stock does. What kind of business the company does? If you can understand that business clearly or properly, you can invest in that stock. For example, if you understand an FMCG Business (Fast Moving Consumer Goods) like Coca-Cola or an IT Business like Microsoft, and if you can understand what that company does, and how it does it, you can invest in that company, and help them in contributing a small part by owning their share. You also have to look after a company’s business model (How the business operates and how people launch their strategy).

You have to make sure if this business will grow in the future or not. For example, if a company does a business producing an electric vehicle, you can think that, in the future, the demand for electric vehicles might increase, because of pollution caused by petrol-diesel vehicles. Therefore that business might be able to supply electric vehicles in the future, and it might grow, followed by growth of your money.

If you do not understand a business, leave it. You do not have to waste your time and energy, researching that stock again and again. However, you can understand a stock by practicing researching it again and again. It is up to you.

Management

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If you have understood their business, and have researched them, the second thing to look after is how that business’s staff and management are. How are people there, managing that business? How the staff treats their employees? Or how the company’s top working people manage the business, and what their planning is? You can check the company’s staff and management’s reviews on Glassdoor.

Ensure if that business has not been in a scam or fraud case before. If all these things are okay for you, you can proceed to the further step.

Financials

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The next thing to do is to check their balance sheet, P&L statement, Cash Flow Statement, and Income Statement. In other words, you must check a company’s past records. The financials of that company tells us about its activities that are done in recent years, months or days. This thing shows a company’s conditions and quality of its assets and the liabilities like debts.

Check if the company has been increasing its sales and profits in recent years. If the company is doing it, you have a sense of surety for that company to do well in the future. Check if the company is not in debt. And if it is, make sure that the company has not taken much of it.

This thing requires some mathematical calculations as well, for calculating various profits and losses, net worth, debt, sales, and many more.

Valuation

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Finally, you have to clear yourself in mind, whether this company’s current stock price will grow in the future or not. If the company’s intrinsic value is greater than its current price or not. Intrinsic value is the value of that stock in the future. In other words, it is the future value of that stock. How much its value will grow in the future?

As said above in the business section, how much value that company or business will get from people in the future, for example, electric vehicles. The demand for electric vehicles might increase in the upcoming future, and therefore, the value it will be given by the people around the world might increase.

If you are buying a stock with a certain price, and if it gets a major value from the people in the future, its stock price will increase, and therefore, your investment value will also increase, followed by increasing your money.

Price is what you pay, value is what you get.~ Warren Buffet