Trading or Investing-Not Comfortable at these highs?
These days markets are in the bull's grip and sometimes difficult to understand and decide for further actions. When I started reading markets in 2017 then also there was almost a similar kind of rally in every stock like anything. I remember that after watching CNBC TV 18, I found lost and blindly I was picking anything they are displaying on the screens.
Even today also facing huge losses in those times purchases. The reason for losses is not that I didn't pick good companies but at that time I was new in the markets and just know that having any good stock can make you rich but doesn't aware of the definition of "Good".
Today I decided to share some of my experience with all who really need it because I just want to make you aware that the first chapter of this stock market is not "How to make money" but "Procuring your money should be your first objective" as profits can be more or less but once you lost your money then no one can help you to earn that.
I am a long-term investor so my advice could be biased toward the trader but what can I do, as I earned this confidence only after losing a lot in these markets.
The first thing is always to remember that Comfort does not come with Great things in life. When the markets were on 9000 then all were waiting to invest in 8000 and when it comes to 10000 then again we think that it will come back to 9000 and so on. Have you ever watched the moon at night while traveling? we always think that the moon is also coming with us to our destination but it never happens, the moon travels at its own time frame and speed, this is only the illusion of our eyes that the moon is following us. this example totally fits in markets we think that we are running with the markets but markets always left us behind and move with their own time frame and speed so there will never be too late or too early.
At these highest levels of markets or at new highs we should search for the best stocks which are still below their intrinsic value and offering a good dividend yield and have the lowest or no default probability. Make a list of those stocks and then keep it preserve in your wishlist so that you can keep your eye on them to accumulate them at good levels.
Always buy half the quantities of any stock you want to buy, like if you want to have 100 quantity of any stock then buy 50 at a time so that you can save your money for another 50 at lower levels to get a good average price. There may be the chance that stock does not come down to do averaging but it's ok to earn less than facing a loss in your investments. After following this strategy you hardly see your portfolio value in red in the long-run.
Keep patience for sometime after investing your money. Investment always rewards you with patience. Clearing your investment motive is very important if you are a swing trader then do not go with value investing stocks, trading stocks may be totally different from investing ones. While once you decide for swing trade then do not hold the stock for more profits otherwise your strategy will not reward you.
There is not any time when every industry booms, the trend is your friend but then also every day you can find something good which is still waiting to get started it's a journey with you, so don't invest in a hurry just to be the feel of "In". Think, do your own research and then accumulate at every dip.
There are a few steps I follow before investing in any stock:
Check all the fundamentals of stock
Check the shareholding pattern in the stock and especially if there are pledge shares or not and promoters are buying or selling their own ownership or they are at the same ratio year on year
Then compare on PE Value of stock and sector PE.
After you get satisfied with fundamentals, then move to the moving averages of stock because it also plays an important role in the pricing of the stocks.
Then lastly you can check the last year's price and the CAGR of the stock. If it is giving 15%+ CAGR then you can invest in the company but remember the first rule that buys only 50% of the quantities assuming that after your purchase the stock will surely come down.
Two strategies would be very wrong in these markets:
- One is buying anything at every price just because you are bullish on the markets or anybody else is saying
- The other is staying ideal that markets will go down then I will start investing because there is no late and no early in markets.
True!
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