PICKING Penny STOCKS AND PLANNING TRADES
Stock picking in many ways is as good as choosing a spouse for you. There are lots of options available to you if you have money. Once you have decided that you want to invest in shares, the biggest question which comes to the mind is how to I buy stocks? How do I plan my trades?
It is up to you to decide in which category of investors you want to be and which strategy you would follow
GROWTH INVESTING STRATEGY
IF you are kind of optimistic investor, then this strategy is good for you. Here the investor foresees the growth of the company’s earnings and invests in it. This type of strategy is considered to the best for beginners in the stock market.
VALUE INVESTING STRATEGY
Benjamin Graham and David Dodd both professors at Columbia Business School, and professors too many big investors, are known as FATHER of this strategy.
In this strategy, the investors tend to buy stocks whose price has recently fallen and are available at cheap prices. But you have to be careful, value investing does not mean “JUNK “.Investors has to do their homework on the companies, and distinguish between the value company and the companies with declining prices. The company should have its fundamentals healthy to prove its worth.
DIVIDEND INVESTING STRATEGY
In this strategy the investors, buys stocks which pay dividends regularly to them on quarterly or yearly basis… The choice of companies in this strategy should be sound and healthy. This strategy may not be the sexist strategy, but in the long run, this time tested investment strategy would definitely yield returns.
CREATING A STOCK TRADING PLAN
If you want to build your wealth, keep your wealth and grow your wealth you should have a solid Stock Trading Plan .A stock trading plan is a fixed set of rules and actions which formulate your trading strategy. Every trade you do should be governed by your trading plan.
Your trade plan is your road map to tell yourself and affirm yourself and reach your goals.
You will have to consider certain criteria for your plan like,
the timing Price of the stock Current news about the stock Liquidity of the stocks How long to keep the stock i.e. to hold them When to sell the stock What to do when the prices of the stock does not move. Etc
You can think of other aspects as well, but the above is the major point s you have to consider.
Once you have made a plan, mock run of the plan in the stock market which will help you to know if your plan is effective or it needs amendments.
THE MECHANICS — PLACING THE ORDER
OPENING A SHARE DEALING ACCOUNT
Once you have decided that you want to deal in shares, you have to open a standard share dealing account, which usually is free. The basic share dealing account offers certain services for free , that means ” No ADVICE ” they would simply buy or sell as per instructions given. They allow you to trade over the phone or thru internet
If you have opened an account with your broker then you have to send them money stating which and how many shares you want to buy. They would charge you certain brokerage fees for their services. Also few of them charge trading fee, if there is no activity for a certain period of time as inactivity fee.
If you are trading through a web site, then it would ask for a username in which you want to open an account and then a password, that’s it and you are on. Once you put theÂ username and the password , it would ask you which companies shares you want to buy, how much you want to buy it would then give you a share quote , if acceptable to you .they get their research on the trading charts and
You can always think and come back again. If the quote is acceptable to you u confirms it and in return you will get an email confirmation by the broker and the deal is done.
Yes, it sounds a little tensed but you will get use to it over a period of time.
It is very important that you do proper research on the stock because the stock markets behave in weird ways and you should have proper knowledge to it. Never buy the stocks at random, as the market is not random and it works on lots of principles and attributes. If you want to succeed in the stock market you have to do proper research. Either you do the research on your own or you can hire someone to do it for you.
5 VITAL ISSUES
Fundamentals about the company. How is the company doing, is it a profit making company and a sound company. What is the price history of the stocks of that company, i.e. how much are the investors paying for the stocks. Price target is also a vital factor; you have to see how much the investors would pay for the stocks in future. What catalysts would change the investor’s perception of the stock? The most important of all compare the stocks with others in the same industry.
So, to sum up we can say that it’s important that as an investor you should have understanding of wider markets trends, knowledge of individual sectors. Also you should be able to analyze the financial records. You should not be able to have access to rumors and upcoming deals. Last but the most important is No emotional bias, generally this last point is overlooked.
Research before buying the shares; this can be done in many ways,
Go through the TV SHOWS and the newspapers, they have all the details of the shares which are doing well. Take valuable tips from friends and family members who have the knowledge of the subject, Never take any decision in HASTE and do not ignore any ADVICE. Full service brokers also help to do the research, they hire the stock analysts and they in turn find out which would be the ideal stocks purchase for the client. They charge a specific fee for their services. Interviews of the owners, CEO’S, directors etc also are helpful as they normally give the correct synopsis of their company. In today’s world the internet technology has made the things easier for the investors to the research on their fingertips, they can research on trading charts and platforms. Some of these charts are available for free and some have costs attached to it.
It is of very important that you get all relevant and correct information on time so as to grow in the market and make maximum profits. You should be aware of that in the stock trading wrong and unreliable information is very dangerous.
HOW TO READ QUOTES
HOW TO READ SHARE QUOTES IN NEWSPAPERS / INTERNET
Most of the people track their stock trades in the business sections of the newspaper or on the internet. The information provided on the stock table is the most current data available.
The stock table looks something like below
Column 1 and 2 are the 52 WEEK High and Low — This is the highest and the lowest price paid for the single stock over the last 52 weeks i.e. one year.
Column 3 is the Companies name and the Type of stock — This column lists the name of the company. If there are no special letters or numbers following the name it is considered to be a common stock, but For example “pf” is return then it means the preferred stock, different symbols imply different types of stocks.
Column 4 is the Ticker Symbol (SYM) — This is the unique alphabetic name which identifies the stock issued by the firm. If you are looking for the stocks quotes online you should search for the company by the Ticker Symbol.
Column 5 is the Dividend per Share — This indicated the annual dividend paid for each share, but if the space is blank then the company is not paying any dividends.
Column 6 is the Dividend Yield –This is the percentage return on the dividend. Some companies do not pay dividends regularly; the Board of Directors decides how much to pay on quarterly basis calculated on annual dividend of the share divided by the price per share.
Column 7 is the Price/ Earnings Ratio –Mostly commonly known as P/E, this is calculated the current stocks prices by earnings per share from the last 4 quarters. The higher the P/E, the more investors are paying for the company’s potential.
Column 8 is the Trading Volume –The figures shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded add”00″ to the end of the numbers listed or multiply the number in the column by 100
Column 9 and 10 are the Days High and Low — This indicates the maximum and the minimum people have paid for the stock in a day
Column 11 is the Close — The close is the last trading price recorded at the end of the day, i.e. at market close.
Column is 12 is the Net Change — This is the dollar value change in the stock price then the last day’s closing price. If the + (positive) sign indicates rise and a – (negative) sign indicates a drop in the price.
HOW TO BUY SHARES?
We have already discussed this before, but just to refresh it further, in ancient days dealing in trade market was only the privilege of the rich people, but now it is not so a common man is also a part of the trade market.
You can buy shares through any of the following ways
Stock broking through bank, custom stock brokers over the telephone or on line trading through internet.
If you have no idea how to go about investing and really need a lots of help then in that circumstances , you can go for ADVISORY SERVICE , where in the stock broker looks in to you individual account and advises you on buying and selling
But , if you wish to hand over the entire thing to someone else, then in that case you can go for DISCRETIONARY SERVICE, in this there is certain strategy between you and the broker which is agreed upon and the stock broker takes all the decisions of buying and selling on your behalf with your money. This type of service risk factor is more.
You can categorize the brokers in two major types,
Discount brokers – these brokers will collect a certain amount of annual fee form you and will only carry out what has been told to them, over the phone, in person or on the internet.Â They would give ZERO advice to you.
Full Service brokers- these brokers give you recommendations and advices on which stocks are good to buy, which will yield profits and which stocks are overvalued. They provided these services with a little higher fees and sometimes even commissions