Friday, 21 December 2012

Stocks - Buy 'em to Keep 'em

OK so you have decided to try the stock market in your master plan of wealth creation. Very well.
Equities do have some great advantages when it comes to financial planning and investments. Just to have a recap, some of the advantages of investing in stocks  and equities, which beginners should know,
are :

  • Liquidity
  • Ability to invest with small capital
  • Ability to get rewarded directly due to the growth of economy
  • Possibility of high return on investments from stocks of good companies.
  • ....and many, many more!! To have a detailed view on the advantages of stocks you can read our post on the Importance of Stock Investments.

But, in order to get the full potential from the stock markets, it is necessary to stay invested.  That is the premise of investments in stocks. Beginners need to understand this. Umpteen number of times, we have seen that people do invest in good stocks and at the right time too, but once the price jumps to a certain level they trade off and book profits. However, staying invested in the same stocks for the long-term may have given even more return on investment and added dividends too.

If you are just looking for price fluctuations in the price of a stock over a short period of time, then you are not investing in equities, but just doing speculative trading. Investing in stocks, on the other hand, has its basis on fundamentals of the company and has the ability to give multifold returns over a period of time.

Just think about it. We have no qualms to put our money in a 5yrly fixed deposit, Govt. bonds or other such financial instruments which give fixed and low returns but we never think of stock investments for such long durations. This is due to the general perception towards stock markets and investment in equities. This needs to change. Think of stock investments in the same way as you do about any FDs, bonds, 5yrly plans etc. Stay invested in stocks just the way you would in FDs and bonds. All you have to do is the initial struggle to spot a good company. Then, you can sit back and watch your money grow like magic.

As the business grows, investor confidence and expansion of the business is directly reflected in the share price and CMP will increase over the long term. Booking profits over short periods when the company itself has a potential of giving much more return on investments is thus a hasty decision and bad investment philosophy. Learning to invest in stocks starts by learning about perseverance and controlling your greed. Next, of-course, is to spot good stocks to invest.

At RupyaGyan we have been giving and will continue to give concepts to spot good companies easily. There are a lot of concepts that we have enumerated in our various posts. These will help in finding good stocks to invest in. Follow the concepts, invest in good companies with strong fundamentals and ability to grow. Thereafter, put your shaky fingers to rest and don't touch the investment for a long long time. Rest assured, you will have great returns.