How to be a successful investor? Half the credit goes to knowledgeable research on the share that you intend to bring to your portfolio and half to the magical touch! The subject of research can be explained but what is this magical touch? This baffles definition and varies from investor to investor. The introduction of internet has made it possible for the investor to trade in any exchange and each exchange has thousands of listed shares. How to create a portfolio of 10-15 good shares? And there is no guarantee that today’s good shares will remain in that condition forever!
Before you begin the process of investing in shares, certain issues needs to be clear in your mind. The best of the brains have tried to pickup the shares and time the market. But the market has proved too smart for them. The market does follow rules, but the investors are unable to comprehend, how the market governs its affairs. The market can boast of ‘helping’ certain individuals who have created history in amassing wealth through trading.
From the point of view of a new investor, the right approach to find good shares to invest in is to follow the methods used by the successful investors. Value investing is one of them. As per this principle, the investor makes efforts to buy shares of good companies that are undervalued. The issue is simple. Eventually the market will award the inherent merit of the share and its price will rise sharply. This means you have bought a good share well in time.
Another area is to visualize the future of the company on the basis of its range, popularity and expected demand of the products. The pointer is towards the emerging markets like Latin America and China. The economies in these areas are experiencing rapid growth. Health care products also shows growth prospectus.
Many investors adopt the traditional methods like Fundamental research and Technical Research to pick the shares. These methods do not say the final word on the subject of investment. Past performance of the company is worth looking into, but that is not certainly the guarantee for the future in the light of the fast-changing technological scene, and the practice of carrying out the international trade through internet. Even the established industrialists will be rocked with the competition for their products coming from the most unexpected corners of the world. Your investment in shares relates to the future of the company and not for its past performance. History has limited role to play in profitable investments.
Warren Buffett says it beautifully: “I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.” Look at the market fluctuations with a dispassionate view, rather with a confused approach. Know for certain that you have no means of averting fluctuations, and therefore try to understand them and evaluate how they will affect the shares that you propose to include in your portfolio. Co-operation with the market trends is better than confrontation. You must take risks to make profits, but be fully aware, why you are taking risks. You need to have solid reasons.
Pose some fundamental questions and answer them yourself-honestly! Who are the managers of the company and are they capable of running it well on a long-term basis? Is that a co-operative team? Is the line of business suits the current market trends? Is the price that you are paying for the share fair? Is it exorbitant? What are the share prices of the comparable companies?
The efforts to find a good share, is an ongoing process. A good share and the good timing of investment will make the trade great. Next is keeping constant vigil on the share- that the business activities of the company are on the right track!