The Power of a Proven Stock Investment Plan
Normally an investor expects two things from the share of a company in which he plans investments.
Regular dividends and capital appreciation! With proper investment plan and choices, this objective is achievable.
If your approach to investments is well organized, you need not worry about the uptrend and downtrends in the volatile share market.
You can do very little about the volatility of the market; but you can certainly plan to remain unaffected by the swings in the share prices.
When you are in the process of building the portfolio, to start with, look out for those companies that have a good track record of taking care of their shareholders by paying regular dividends.
Incremental growth in dividends every year is further indication that the company is prospering.
This factor alone is not the pointer to the perfect heath of a company, but this is an important issue.
Bonus shares and right issues can be expected from such companies.
The rising rate of dividends acts like the shield of protection against inflation.
A proven investments plan needs to take care of the following: 1.
The strategy for selection of the shares must conform to a systematic form of analysis.
The goal is to maximize the total return on investment for the holding period that has to be targeted at the time of investing, the risk tolerance levels, degree of portfolio diversification etc.
The analyst visualizes how a share is going to move taking into consideration "long" and "short" positions.
The disciplined approach to selection of the shares is the sure gateway to success.
2.
With many thousands of shares listed in the stock exchanges, selection of shares is a complex job.
No fool proof method can be devised to accurately predict the growth of a share as several factors interact on the price of a share.
The price movement can not be estimated on speculation.
Amidst all the confusion, certain yardsticks will have to be applied before deciding in favor of a particular share.
The analytical components help to a great extent to arrive at near-correct conclusions.
3.
Different economic sectors and industries will perform differently in varying conditions.
Service sector industries perform well even during recession.
Business cycles impact the sales of certain companies.
A business analyst will monitor sectors that show signs of an impending turnaround and advise the prospective investor accordingly.
4.
Quantitative Cumulative Value Analysis, also known as the fundamental analysis relates to the past records of earnings, sales, assets, management etc.
These are all carefully scrutinized to assess the intrinsic value of a share.
Compare the price thus arrived to the current market price to decide whether it is undervalued or overvalued.
Similarly the method of Technical Analysis of the shares is also popular amongst the researchers and analysts.
5.
Management issues: This is the acid gets for an investor.
Human factors supercede all other issues in an organization.
What is the perception of the management in these fast changing technological advances, which have the capacity to change the entire production and market scenes of the product, within a short period? Is the management capable to meet such eventualities? Does it have the alternative plan ready and is it in a position to implement it with the greatest possible speed to beat the competitors? The stock market wizard Warren Buffet observes, "The primary test of managerial economic performance is achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.
) and not the achievement of consistent gains in earnings per share.
" Set your goal, strategize well in time, make periodical risk assessments, make proper calculations about the profit potential, keep an alternative strategy ready, be in touch with a good broker and take his advice, when in doubt.
The investment plan derives power from your discipline and sense of timing for trading.
Regular dividends and capital appreciation! With proper investment plan and choices, this objective is achievable.
If your approach to investments is well organized, you need not worry about the uptrend and downtrends in the volatile share market.
You can do very little about the volatility of the market; but you can certainly plan to remain unaffected by the swings in the share prices.
When you are in the process of building the portfolio, to start with, look out for those companies that have a good track record of taking care of their shareholders by paying regular dividends.
Incremental growth in dividends every year is further indication that the company is prospering.
This factor alone is not the pointer to the perfect heath of a company, but this is an important issue.
Bonus shares and right issues can be expected from such companies.
The rising rate of dividends acts like the shield of protection against inflation.
A proven investments plan needs to take care of the following: 1.
The strategy for selection of the shares must conform to a systematic form of analysis.
The goal is to maximize the total return on investment for the holding period that has to be targeted at the time of investing, the risk tolerance levels, degree of portfolio diversification etc.
The analyst visualizes how a share is going to move taking into consideration "long" and "short" positions.
The disciplined approach to selection of the shares is the sure gateway to success.
2.
With many thousands of shares listed in the stock exchanges, selection of shares is a complex job.
No fool proof method can be devised to accurately predict the growth of a share as several factors interact on the price of a share.
The price movement can not be estimated on speculation.
Amidst all the confusion, certain yardsticks will have to be applied before deciding in favor of a particular share.
The analytical components help to a great extent to arrive at near-correct conclusions.
3.
Different economic sectors and industries will perform differently in varying conditions.
Service sector industries perform well even during recession.
Business cycles impact the sales of certain companies.
A business analyst will monitor sectors that show signs of an impending turnaround and advise the prospective investor accordingly.
4.
Quantitative Cumulative Value Analysis, also known as the fundamental analysis relates to the past records of earnings, sales, assets, management etc.
These are all carefully scrutinized to assess the intrinsic value of a share.
Compare the price thus arrived to the current market price to decide whether it is undervalued or overvalued.
Similarly the method of Technical Analysis of the shares is also popular amongst the researchers and analysts.
5.
Management issues: This is the acid gets for an investor.
Human factors supercede all other issues in an organization.
What is the perception of the management in these fast changing technological advances, which have the capacity to change the entire production and market scenes of the product, within a short period? Is the management capable to meet such eventualities? Does it have the alternative plan ready and is it in a position to implement it with the greatest possible speed to beat the competitors? The stock market wizard Warren Buffet observes, "The primary test of managerial economic performance is achievement of a high earnings rate on equity capital employed (without undue leverage, accounting gimmickry, etc.
) and not the achievement of consistent gains in earnings per share.
" Set your goal, strategize well in time, make periodical risk assessments, make proper calculations about the profit potential, keep an alternative strategy ready, be in touch with a good broker and take his advice, when in doubt.
The investment plan derives power from your discipline and sense of timing for trading.
