Stock Market investment is one of the way to invest your money. By Investing in stock you can get a financial return!.
• Investment. There are many reasons why stock market attracts investors. Firstly, as return from stock is more than the inflation rate. Secondly, tax on stock return is lower than other investments. Finally, liquidity ie. Converting to cash is comparatively easier than other investments, simpler by a calling your stock broker. Investing in Stocks od a good diversification strategy.
• Fundamental Analysis. Fundamental analysis is the foremost method used. Where the investor looks into various indicators to look into the strength of the stocks before purchasing it. PE ration i.e. the Price to earnings ratio is an important measure. Some investors look into debt-to-equity ratio. By these methods compare the performance of company with each other.
• Technical Analysis. Second method used is technical analysis. Where variety of graphs are used to predict the company’s performance. Examining the trend of the graph will allow the technical analyst to predict the future performance of the company based on the past numbers.
• Bull vs. Bear Markets. The words Bull and Bear are highly used in stock market. First of all we’ll see what these means. Bull market is where the stock prices are increasing and expect investors also rise in line with increase. Bear market on the other hand where the stock prices are falling and the investors also fall. As investors loose money, as of this there is less willingness and demand from investors to take risk. Bear market is the sign of weak economy.
• Passive vs. Active Investing. Passive investment is the good old way of invest in bank and earn interest where you believe bank is safe. Where as the extreme opposite way of buying stock on-line and sell in five minutes, which is called active investment.
The normal investment strategy is to “buy and hold”. Long term investors believe, in the long run the stock price will increase and dividends paid for these stocks gives an return to them
• Momentum Investing. Look at stocks which prices are rising and invest in those assuming the price will continue to increase in the future.