Common Stock
The Stock Market Was Up Today, or In the Term Stock Market Bubble.
The Term Stock Market Is a Somewhat an Abstract Concept for the Mechanism that Enables the Trading Of Company Stocks. Experience Shows That The Price Of Shares And Other Assets Is An Important Part Of The Dynamics Of Economics Growth. Share Prices Affects The Wealth Of Common Man. It Also Affects The Household And Their Consumption.
Therefore The Stock Market Can Be Swayed Tremendously In Either Direction By Press Releases, Rumors And Mass Panic. A Considerable Part Of The Stock Market Is Comprised Of Non Professional Investors, Or Investors Belonging To Diverse Schools Of Thought Many A Time The Market Tends To React Irrationally To Economic News, Even If That News Has No Real Affect On The Technical Value Of Securities Itself.
Investment Is a Serious Business:
Reading Some Books ,Scanning Some Magazines , Looking At Some Websites Or Talking To A Friend And Then Picking Up A Stock Is Nothing But A Crazy Act On Our Part. Picking Up Stock Is Just Like Operating A Patient Or Designing An Office Building. Philosophies Of Investment Are Like Religions. There May Be Multiple Paths Toward Spiritual Growth, But It Is Necessary To Find A Path That Speaks To You. One Cannot Be A Devout Christian One Day, A Disciplines Muslim the Next Day, And Still Later Devoted Hindu. You Will Have To Stick To The Investment Strategy For A Long Time.
People Say That Equity Market Is Most Risky Class Of Investment. Risk Capital Is Provided To The Economy By The Equity Shareholders. But If You Can Identify Value And Buy Stocks At A Price Which Is Considerably Lower Than The Value, By Which You Can Reduce Your Risk Element To A Great Extent. You Can Make Risk Free Investment In Equity Too!
Market Timing Refers To An Attempt To Time Investing Decisions So As To Invest In Assets Which Are Expected To Go Up In Near Term And Divest From Assests Which Are Expected To Go Down In The Near Term. In Order To Take Advantage Of The Anticipated Stock Market Movement One Has To Shift Assets Between Cash And Stocks Generically. Market Timers Are The Ultimate Buy Low And Sell High Traders. Day Traders, Who Move In And Out Positions in Minutes or Hours, Are Extreme Market Timers. They Look For Small Profits Each Day By Capitalizing O Swings In A Stocks Price.
A Successful Market Timer Does Not Have To Do Much Homework Since Market Timing Alone Delivers Handsome Returns For Him, Due To Which He Become So Confident Of His Strategies.Unfortunetly,This Very Payoff To Timing The Market Makes Him An Easy Victim For The Next Market Timing Strategy. Telling Which Way The Train Will Go, By Just Looking The Track Is Not An Easy Job.
Information Advantage, No Longer Available:
Determining Tomorrows Prices By Using Yesterdays Information Can Not Be Done Now.Indentifying Market Moves Before They Occur Has Challenged Mankind For Thousands Of Years. Market Gurus Claiming Countless Things over the Years, But No One Has Been Able To Show That Their Crystal Ball Consistently Works. The Speed At Which The Information Is Flowing In This Modern World Has Not Solved The Problem, But Has Aggravated It. In Todays Technology advanced World, It Is Difficult, and If Not Impossible for One Person to Get Information Faster than Everyone Else. Thinking That Information Is an Advantage, Is Just a Myth Now. What Essentially Was The Domain Of Fund Managers And Large Institutional Investors Has Now Become Accessible To Small Investors Also, Thanks To The Internet. The Cost Of Accessing The Information Has Gone Down Considerably.
Interpreting the Information correctly and on Right Time in Necessary in Todays World. If You Are A Bit Late The Opportunity Is Gone. This Is True For Majority Of Investors As Well The Individuals Managing Their Own Accounts. The Faster Has Been The Flow Of The Information In The Public Domains, The Smaller Is The Advantage Window Available.
Correlation Does Not Equal Causation:
There Are Wide Range of Tools Available In Market for Disposal In Front Of Market Timers. Many of Them Apparently Spurious, Others May Give an Impression of an Exact Science. Considering Macroeconomic Variables-Like Interest Rates and GDP Growth-Are Also Being Considered by Some People to Predict, Which Share to be Buyed When Interest Rates Are Low. While Low Interest Does Lead To Higher Economics GDP Growth, It May Fail To Lead To Higher Share Prices If The Growth Was Less Than What Was Anticipated By The Market.
Investment Is Not Speculation:
A Speculator Is In The Market With An Intention Of Making A Quick Buck, An Investor Buys A Bargain, And Would Like To Hold On To His Investment Till The True Value Is Realized. The True Investor Is In That Very Position When He Owns A Listed Common Stock. Own Judgment And Inclination Can Act As An Advantage For Leaving A Daily Market Price. He Must Take Cognizance Of Important Price Movements, For Otherwise His Judgment Will Have Nothing To Work On. Conceivably They May Give Him A Warning Signal Which He Will Do Well To Heed-This In Plain English Means That He Is To Sell His Shares Because The Price Has Gone Down.
Steps Which Can Make You Investor:
1) Buy A Portfolio Of Quality Shares At A Reasonable Price.
2) Either Content Yourself With Returns That Are Average For The Investment Type, Or Focus On The Best Value Shares Of The Type Of Superior Returns.
3) Try To Justify Your Purchases With Reasonable Projections Of Profit That Are Not Out Of Line With Historical Returns For Companies Or Industries Of This Type.
4) Buying Something Because The Price Has Fallen And The Yield Has Raised To The Point That It Is Superior To Alternative Investments.
5) You Should Have Substantial Reason To Believe That The Investment Is Not Junk.
6) Selling the Stock Because the Stock Is Deteriorating Your Fundamentals in That Stock.
7) Market Quotations Are There Only For Your Convenience, You Choose To Sell If The Investment Looks Absurdly Expensive Or You Buy When You See The Opposite, But Other Than That You Ignore Volatility.
8) Keeping A Close Eye On Those Looking After Your Stock, Will Help You Do Better.
9) You Should Also Look Into The Tax Efficiency, And Also Take Your Tax Returns Into Account While Weighing Up Various Options.
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