How to select good stocks for investment/ Trading
Before selecting a good stock/share, need to understand your requirement first, and then only we can able to decide, how can we buy/sell stocks?
If you are planning for your retirement and trying to buy some stocks for that, then the stock selection process is different. But if are planning for short term income generation, then the stock selection process is different.
(For Long term investment): – First we need to Fundamental analysis, then technical analysis.
Fundamental Analysis: – Fundamental analysis tells us what stocks need to buy/sell. The stock is fundamentally strong or weak.
For this we are looking few factors, which are more important to analyze before investing any stock.
These are given below: –
- EPS (Earning per Share): – EPS is a portion of the company profit allocated to all the outstanding shareholders. It indicates that, the company is making profit or not.
If a company EPS is increasing year by year, then it is good to invest in that company, otherwise it’s not a good idea to invest in that company.
- P/E (Price to Earnings ratio): – It measures the company’s current share price relative to its price earning.
In other words, we can tell that, people expecting annual return from a company.
- G Factor (Growth Factor): – If growth factor is good, then it’s good to invest in that company.G Factor >= 7: It’s better to invest in that company.
7> G Factor > = 4, we can invest in this company also.
4> G Factor > = 2, If you will not find any other good stock, then only need to invest this stock.
2> G Factor, don’t invest in this stock.
- (Operating Profit): If operating profit is increasing year by year, then it’s good for the company.
- (Net Profit): If net profit is increasing year by year, then it’s good for the company.
Basically need to look into these basic things, before investing in market for long term.
Technical Analysis: Technical Analysis tells us, what will be the correct time to buy/ sell in stock market.
For technical analysis, we need to understand about certain things like how to read charts (chart means candle stick, Renko, Heikin Ashi), understand about oscillator and indicator, etc.
(For Short term investment): – Only Technical analysis is enough to invest in stock market.
So, by the help of Fundamental and Technical analysis, we can get better result in our investment.