One needs to use some common sense plus some valuable time to pick a stock that can deliver multiple fold returns over years. These are some important principles on which fund managers and great investors will be making decisions based on.
One needs to first understand the basic difference between a trader and a investor. A trader is one who takes risk to make money on day-to-day basis. As trading is a zero sum game, one has equal chances of making money or loosing money. In the process you will make your broker richer.
An investor is one who puts money on a asset to own it and wait patiently over time for the asset to grow. Most of the self made rich people on this earth have followed this route. The asset may be equity or some other area.
To start with, I recommend going through Stock market guide mentioned below . A guide which will explain some very basic must read concepts of stock markets. I assume now you know about EPS, PE Ratio, and Growth etc.
An important fact that should be followed is to know about the company you are planning to buy. Once you short list a company, look at the financials of at least last 3 years. Make sure that sales and net profit is rising continuously. Also make sure that company is paying dividends regularly. Next step is to project a growth figure for the next few years. This is not as complicated as you think. The past history gives you a good lead. Most companies will try to beat previous growth records.
The best method is to buy a stock available at a PE multiple of half the expected growth rate. That is to buy a company available at 15 PE or less if you are expecting this company to grow at 30% annually for next few years.
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Author: stockmarketguide
Author Bio:
Read fundamentals of stock markets at Stock market guide. The author Ananda kumar is the webmaster of www.mumbaibull.com/. Althogh irrelavant market for you, go through the site to look at the success achieved in following this stratergy. An www.stockmarketguide.org/investor.asp??>investor should be able to beat other investment returns using this method.
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