Is buying share on dips a good investment strategy?

Is buying share on dips a good investment strategy?

When markets are down they offer investors great opportunity to buy good quality shares at discounted prices. Markets are down because there are more sellers than buyers.

good investment strategy

In other words, buying at times when fear factor is high is not easy. Most investors fail to derive the maximum benefit from such opportunity.

At this crucial time, when markets are crashing like a pack of playing cards, they junk the idea of buying on dips. You can take help of stock advisory company to minimize your losses.

Must Read: Top ten day trading secrets for beginners

The idea of buying when the market is low is not a bad idea. But that can backfire when moving stocks are bought on small corrections. Applying a set of reasons or giving logical basis to stocks that are on the rise does not work. Let us see that how buying on dips for moving stock works.

Market move up or down or remain sideways. They can rise or fall sometimes around 20 percent in a time period of six to nine months. If the market is up, it does not mean all shares are going up and vice versa.

You can take nifty future tips regarding buying of shares. There are few heavyweight shares that can change the direction of the market. Sometimes it is the complete sector.

Must Read: All time stock trading techniques that you should follow

Global markets are in upward momentum. They are scaling new heights every now and then. As P/E of the top companies, valuation is not cheap, compared to their historic value and their liquidity flow.

George Soros said, “Rising prices attract buyers, whereas falling prices attract sellers.” This propels a momentum in asset prices which creates a bubble on the way up.

People come to know about stocks from various sources. Like TV channels or a business newspaper. Discussing with family or friends that some stocks are performing very well.

Once they see that stock is on a constant rise they invest. Whenever a dip of 20 percent or so occurs, in a hope to make fortune as someone else did. Instead they should take advice on nifty option tips  provider before venturing.

Must Read: How to take first step to make money in share market?

They keep track of those stocks and when there is small correction they buy it. The stock price by now has reached their peak. They forget to do the fundamental and technical analysis. At this point, they are highly overvalued. Then after peak comes the fall.

While buying they compare the dip from the present high. They fail to see overall stock prices that have been prevailing for last few years. They can diversify and take commodity tips also as one of the option.

One thing dip investors do not inquire is why the stocks are taking a dip. What should be the actual value of the stock? They take this as an entry point whereas momentum investors are existing.

The entry point of dip investor is the exit point for momentum investor. Dip investor enters at price level which is very high, and there is hardly any chance of growing further.

Must Read: Why should you diversify your share portfolio?

Certain dip investors buy at every dip. What they are doing is that they are increasing their problem.

The stock market has gone through crashes or major correction at least once in a decade. And minor correction every few years. Real estate shares tanked in 2008, tech business shares tanked in 2000, etc.

Many people have still not recovered from crashes or major correction. Which usually happen so suddenly that they do not give enough time to the investor to become stable.

Many have professionals have advice to stay away from the technique of buying on dips only. Value the share, and go for it whenever it is worth buying.

How to start investing for a useful purpose?

Investing had become the need of every person in today’s fast moving life and ever-rising costs. The matter raises how to start investing for a useful purpose.

How to start investing for a useful purpose

One should have a clear purpose and reasons for investing. It is a very important if one wants to invest successfully. Investing just because everyone other person is investing, then you will be unsuccessful.

Bodybuilders go to the gym, as they have a purpose to have a muscular body or want to develop six pack abs. If one has no purpose, then investing can be difficult, tedious and even dangerous.

Investing for a useful purpose

If you have a goal then one can track his own progress. If one is going out of course then it can be corrected. Or if moving slow, then it can speed up. Here are two purpose.

  1. Retirement investment

It is not possible to predict, what will be the cost of living few years or decades from now. How much amount, one will need to maintain the present lifestyle in future. It is this uncertainty and future rate of inflation that makes us plan for the retirement.

In these uncertain times, the investment made today will come handy after retirement. Present investments will help one to make a solid path once one’s working years come to an end.

Must Read: What Is The Purpose Of Investment In Share Market?

If you have a number of years in your hand, your investments will have more years to grow. Remember you have to fight inflation too. You have not only to defeat inflation by just a few percentage points. But have to get a good lead over it, as your money will not be worth as it is of today.

Risk-taking capacity decreases as one gets older. That is in future you will be making investments in only those instruments which carry less risk. Instruments which carry less risk, returns are likewise less. Another side of the coin is if you start young you can take greater risk for greater gains.

Must Read: Why should you diversify your share portfolio?

Younger you start investments, earlier you learn about in’s and out’s of investments. Financial consultants are difficult to choose and are costly. So it is best that you manage investments yourself whenever possible.

If you are investing for retirement then it is a long-term investment. You will have to see for quality investment, which you buy and hold for long term. This will be your capital.

Your investment portfolio will be a mix of stocks, mutual funds, precious metals. And also FD, bonds, debentures, PPF and saving in a bank account. The proportions of mix change over time as you grow older. Moving from high-risk investments towards low-risk investments.

  1. Setting up small financial goals

Financial goals can be of short-term too, like buying a computer or high-end TV. The medium-term like going for a holiday abroad. Or buying a new car, alteration /modification at home, changing complete furniture, etc.

Investments can be also made to enhance your employment income. And help you buy those things that you want. Since investment changes with investor’s desired goal. It is not like retirement investments. It is a mix of the long and short-term.

Must Read: How to take first step to make money in share market?

Like, if your aim is to buy high-end TV you will need short-term investment. But if you plan to buy a home than long-term investments will be needed.

Investment strategy should be in the line of your goal. That is if you wish to buy a high-end TV, in a year’s time than your investment strategy will be different. And if you wish to buy a new car or go for a trip abroad then your investment strategy will be different.

The most important thing is to set your goals first. Plan how much budget you will need. Once your goal and time frame is set. Other purposes like celebrating birthdays in a posh manner. Or other expenses which seem more important at that instant time can be cut down or decreased.

Must Read: How to earn regular second income from stock market?

It is exciting and challenging to achieve financial goals. You will be more motivated to learn about investments which give you better returns.

For Free Investment Tips Visit: https://goo.gl/2nhRwT

How to recognize a dividend paying company?

When the company makes a profit, it distributes a part of its earning among shareholders. Amount (percentage) and date of distribution is decided by the board of directors and paid to a class of its shareholders. The dividend is usually paid by cash (cheque or ECS), usually once in a financial year.

How to recognize a dividend paying company

The most important factor in determining a dividend is company’s net profit. The company will earn a good profit if it is a dominant player in its sector or industry. And also if it has a durable competitive advantage, and is ahead of its peers.

Let us see which all companies will pay dividends and how to identify those companies. You can also make money in share market without investment.

There are certain characteristics that one should look for identifying dividend paying company. Let’s see them one by one.

  1. Free cash flow of the company

Total cash generated by the company, during a financial year is cash flow. After deducting all the expenses etc, the company is left with some cash. This cash is called free cash flow. The free cash flow by the company can be used to either expand its operation or pay dividends. After covering their future expenses. If some cash still remains then this cash is paid to shareholders as a dividend.

What should the dividend investor look for? He should look for cash flow history of 5 to 10 years. He should also see for its dividend per share for the same time duration. If both are rising at an almost same rate, then the investor should go for it.

Must Read: How to take the first step to make money in share market?

  1. Dividend history of the company

Company paying an irregular dividend should not be trusted. Because one cannot be sure that it will pay a dividend in future or not. The company should have a long history of stable and regular dividend payment.

See the history of the company for last decade or so. Analyze the trend of dividend yield. It should be part of your portfolio if it has given stable or rising dividend yield. Dividend history can be seen at the website of all the stock exchange in India where you can invest your money.

  1. Debt of the company

The company borrows money from market or bank for its expansion or other business needs. Many companies have huge borrowing on their books. This borrowed payment sometimes is very high and takes away a huge part of profits. If profits are decreased then it is not possible for the company to pay a dividend. It is in the interest of investors to avoid these companies.

A slight increase in interest rates will decrease/wipe out company’s profit. Even if the board of directors of the company wishes to give a dividend. They cannot give, because of the shortage of funds.

Not only in share market but also commodities trading companies can be considered on same lines. Commodity trading tips for beginners can be had from agents/brokers of commodity exchanges.

Conclusion

See to it that your portfolio is diversified across sectors. This reduces the risk, as some sector performs best and some perform worst, at a given period of time.

Must Read: How to earn regular second income from the stock market?

One should never over-exposure the investment in only one company and one sector only. Some sectors perform contradictory to each other. Like when share market is on high ROI path, gold is at low ROI path, and vice versa.

Plan for dividend income should be made during working years as it needs time to grow. Patience, research, and regular investment help you achieve your targets.

Dividend income is one of the best passive sources of income. It provides the investor with regular and steady cash flow when other sources of income are dried up. It can be a source of regular income during retired life. One can see forward to rich, wealthy and worry-free life.

How Do You Invest in Stocks for the First Time?

You finished your academics, and now having a comfortable but struggling job, and have little extra funds and are planning to save for your car or a home or started building for an adequate retirement fund.

How Do You Invest in Stocks for the First Time

When looking for investments for your dream car or house or anything, one has too many options and young people often get confused, where to begin and how to begin, because some investments are often too complex and difficult to understand.

If you have decided to invest in stock market, there are certain things that you should keep in mind

 

  1. Learn about investing

To learn more and more about investing best friend is reading and knowledge gaining. There are numerous books, magazines, periodicals which are focused on the share market. There are books available written by distinguished authors. Articles also appear in business newspapers and magazines.

You can also ask for advice from successful traders. Their view, opinion, their calculations, and observations. Gaining knowledge is the best form of protecting your hard earned money. There are benefits of intraday trading.

 

  1. Opening account with established brokerage firm

Open trading and demat account with brokerage firms which have vast experience. They offer trading tools like candlestick analysis, stock screeners etc. so that you can filter out good stocks form not well-performing stocks. The fundamental and technical analysis also helps you in segregating good, better and best stocks. Brokers get company news much before it spreads inthe market, which gives you an added advantage. Better take an overview of Indian stock market before opening an account.

 

  1. Control your emotions

One should think of gain/loss in stocks from a logical point of view and not from an emotional point. It is your business and should be respected and treated as one, emotions should be kept on the backburner. There are many traders who cannot control greed. They expect that the share prices, which they hold, to keep on rising forever which in reality is impossible. One should not stick unnecessarily to shares which are non or underperforming. You can make money in Indian stock market provided you “play” with brain and not the heart.

 

  1. Certified financial planner

Do not take your investments decisions from any Tom Dick and Harry. They can be anyone who has the least knowledge about share market dynamics. They can be your friends, family member or anyone. Remember it is your hard earned money and you cannot afford it to jeopardize your investment plan. And later tell you “I told you . . . . “  and wash his hands off. Better take help of a certified financial planner, who knows when to enter and exit the market. Which shares to hold, which to buy, which to sell depending on market conditions? You can also join best share market training institute and gain knowledge.

 

  1. Investment amount

This is one of the most important decisions to take. How much amount one is having as surplus and how much to invest? You should keep a certain amount for unforeseen future needs. If you don’t plan properly then when some funds are needed for the emergency purpose, you may have to sell shares, for a loss, if the market is in correction mode at that time, and you intended to hold it for a longer period. Stock market investment tips can be had from reputed and registered firms with SEBI on the official website.

Is it profitable to invest in shares?

Just like any other market, say a vegetable market or fruit market, a financial market is a place where buyer and seller meet to enter into a securities transaction. The place where this exchange of share takes place is called stock exchange.

There are many stock exchanges in the world. They are located in the major financial center in the world. Like New York, London, Tokyo, Shanghai, Mumbai, Hong Kong, etc. Companies have to list themselves on the stock exchange so that their shares can be traded. Also, see an overview of Indian stock market for a better idea.

Is it profitable to invest in shares

 

Shares are bought/sold through firms who are called stock brokers. These stock brokers charge a fee for the services that they give. They are full-service brokers and discount brokers.

  1. Variety of stocks

One can invest in the stock market by either selling/purchasing by oneself (benefits of intraday trading) or by investing in mutual funds (or fund company). By investing through oneself, one has to pay only brokerage charges. By investing in the mutual fund, charges for managing fund are automatically deducted.

By investing through the mutual fund (MF) the fund manager invests in a number of stocks on your behalf, diversifying in different equities so as to reduce the risk, better return on investment and keeping day to day watch on the market.

  1. Investment companies

The risk is always involved while investing. Be it banks, equity or whatever. Though the degree varies and so do the returns. Investors should balance risk and rewards before investment. Here your risk-taking capabilities come into play. Some investors are risk lovers and some are risk averse. One should know when to sell shares to make a profit.

Hence it is critical to choose the right company to invest in. To reduce risk, one should select such a company that has good cash flow, good saleable product range (present and future) and has large enough market capitalization (mostly blue chips and mid-caps), good and proven management (board of directors).

If you are investing in equity through mutual fund route, see to it which sectors they are investing in. Broader the sectors better but not too broad. As broader sector tend to be less volatile in terms of returns.

  1. Mix portfolio

Equity investments have the tax advantage as there is no capital gain tax if equity is held for more than one year and dividends are taxed at a much lower rate as compared to interest income. Dividends are not too regular as interest. Hence one should have an investment which is a mix of equities and fixed income.

Depending on your risk tolerance factor (both emotionally and financially) one should choose accordingly. If you are a risk lover than you can have more of equities and less of interest income component. And if you are risk averse the opposite is true.

  1. Time period of investment

As far as equity investments are concerned, to get better returns one has to stay invested for a considerable period of time to get better returns and one has to make certain adjustments depending on market conditions as and when needed. No need to time the market when they are high or low, that is how to make money in Indian stock market.

From available data, one can see that for long-term investments, the equity market has given better returns compared to interest paying investments. Bank interests are unable to beat inflation as everybody knows inflation rate is moving more ahead of interest rates year on year basis. There are many myths and facts about Indian stock market which should be cleared before investing.