Last Updated on Mar 22, 2023 by Gayathri Ravi
Assume you have all the money that you need to fulfil your current ambitions. Now you are looking at a business that will solve a bigger problem and want to be a part of it. When you think like this, you will not get hit by the emotion of greed; you will try to understand the business model because now you want the problem to be solved.
So first, start with the management, what they do and what their vision is for the company.
Our research reports cover this as a first step because we always want our investors to understand the business before investing.
Now comes greed. You should always take care of every penny invested, so try to determine the price at which large volumes emerge. This makes you think rationally because someone who has taken a big position must have analysed the company’s financials. Now if the price is increased after this volume, it means many more hands have joined this journey. This way, we have spotted the stock with experienced investors interested in the long term. So this is trading.
Understanding the fear
Market is emotional, and market participants are emotional. When the market reaches a swing high, investors fear losing the profit, and new investors rush to join so they cannot lose the rally. So this fear of missing out leads to transactions.
New investors are just like butterflies. They have a very small share in buying, and that too just because of emotions, so the selling by long-term investors will be significant, and this leads them to a new trigger, which is news flow.
Role of news: As a few investors invest only with limited guidance, this trigger comes into play because new investors browse content online. And when there is some negative news in the market, these investors rush to book profit (prevent loss), and they start placing sell orders. While experienced traders are in no hurry to buy, they keep their buy orders at some pre-calculated levels, which can add strength to their positions.
So before taking any action concerning the investment, an investor must understand the after-effect of the news.
Understanding the data published on the NSE website
While investing in the market, one also wants to stay updated with the latest news and declarations. NSE keeps their website updated with relevant information about the companies. And investors can make use of it.
Focus on leaders
Though we strongly believe that leading stocks of sectors are generally overvalued, we still cannot deny the charm of adding leaders in the observations, and this also helps us track the news and the commentary of powerful managers of leading firms.
For example, an IT firm posted good results. We try to find out from the management about their expectations, plans to lead them to achieve this result, and which other firms are emerging as a substitute with increasing earning ratios.
You can also check Tickertape Scorecard to analyse the performance, growth, valuation, red flags and more of your preferred stock.
Earning ratios
Investors cannot move forward until they calculate what the investment is going to generate and how much market participants are willing to pay as the market price for earnings per share. Companies earn profits for their shareholders, and this profit, when divided by earnings, gives Earnings Per Share (EPS). Now, a smart investor focuses on the change in EPS every quarter to understand the story.
Use Tickertape Stock Screener to find the EPS of a stock and analyse it better with 200+ filters available.
Disclaimer: This educational content is only for learning purposes. Do consult with your investment adviser before taking any investment decision.
This article is written By Gaurav Sharma, a SEBI Registered Research Analyst. Check out their Gulluck smallcases here.
As the founder of the website gauravsir.in, he is constantly creating and posting educational content for users.
