CHAPTER 8
HOW DO I BUY AND SELL SHARES?
In ancient days buying and selling stocks/shares was the privilege of the rich , who with the help of certain share brokers use to buy and sell shares and among those few , the ones who had the inside information of the companies use to mint most money.
But the today’s internet age, the entire information is available to the common man, making him pretty much the part of this never ending market. As now most of the information is available on the internet, the stock brokers give their services with no frills attached , meaning you tell them which shares you want to buy or sell and they would do exactly the same , no advice given .
There are big stocks brokers like Barclays, Brennan etc who charge for the service their certain amount of commission for each deal, and also few brokers charge you yearly and quarterly fee just to keep your account open and do the dealing on your behalf.
Investors buy shares only for the purpose of income in forms of dividend, and then they should scrutinize properly and buy such shares that yield the most dividends.
Some investors are not interested in income but are more inclined towards capital growth, hence when the share price increases in anticipation that the company will yield more profits in future and which will affect the increase in the dividend payments… hence investors who are interested in capital growth, should invest in share that are expected to yield huge dividends in future.
CHAPTER 9
WHAT TYPE OF TRADER ARE YOU?
Each individual who is the stock market and is intending to make money has to identify himself from the various trader types he falls into and has to utilize that strategy.
The following are the types of traders,
POSITION TRADERS
Most investors fall in this category, as they buy stocks and hold them for months and years expecting to get more profits out of it. Institutional investors, mutual funds and investment banks are interested in such stocks which yield profits in long term. They concentrate more on the financial strength of the company and not in technicalities.
SWING TRADERS.
These are the traders who look for the fast movement in the market. Fast buying and selling , and in this short term of holding shares these types of traders make lots of wins and losses .They have the fast profit making mentality , they have high risk to reward ratio.
DAY TRADERS.
The stock market moves up and down every day and these types of traders make the most and capture the big portion of the move. He does not believe in keeping the stocks for more period of time like position and swing traders. He uses the stock market as source of income and not investment.
CHAPTER 10
INVESTING
PICKING STOCKS AND PLANNING TRADES
Stock picking in many ways is as good as choosing a spouse for you. There are lots of options available to you if you have money. Once you have decided that you want to invest in shares, the biggest question which comes to the mind is how to I buy stocks? How do I plan my trades?
It is up to you to decide in which category of investors you want to be and which strategy you would follow
GROWTH INVESTING STRATEGY
IF you are kind of optimistic investor, then this strategy is good for you. Here the investor foresees the growth of the company’s earnings and invests in it. This type of strategy is considered to the best for beginners in the stock market.
VALUE INVESTING STRATEGY
Benjamin Graham and David Dodd both professors at Columbia Business School, and professors too many big investors, are known as FATHER of this strategy.
In this strategy, the investors tend to buy stocks whose price has recently fallen and are available at cheap prices. But you have to be careful, value investing does not mean “JUNK “.Investors has to do their homework on the companies, and distinguish between the value company and the companies with declining prices. The company should have its fundamentals healthy to prove its worth.
DIVIDEND INVESTING STRATEGY
In this strategy the investors, buys stocks which pay dividends regularly to them on quarterly or yearly basis… The choice of companies in this strategy should be sound and healthy. This strategy may not be the sexist strategy, but in the long run, this time tested investment strategy would definitely yield returns.
CREATING A STOCK TRADING PLAN
If you want to build your wealth, keep your wealth and grow your wealth you should have a solid Stock Trading Plan .A stock trading plan is a fixed set of rules and actions which formulate your trading strategy. Every trade you do should be governed by your trading plan.
Your trade plan is your road map to tell yourself and affirm yourself and reach your goals.
You will have to consider certain criteria for your plan like,
the timing
Price of the stock
Current news about the stock
Liquidity of the stocks
How long to keep the stock i.e. to hold them
When to sell the stock
What to do when the prices of the stock does not move. Etc
You can think of other aspects as well, but the above is the major point s you have to consider.
Once you have made a plan, mock run of the plan in the stock market which will help you to know if your plan is effective or it needs amendments.
