When buying and selling shares | Stock Exchange in early 2021
Today we are going to talk: to know when to buy shares and most importantly when to sell them.
Sometimes we make big profits and we don't even know when the shares will be sold. What happens if I sell it and the price goes up? What if I don't sell it and the price goes down? There is a lot of confusion about this.
Today we are going to understand that. What is the right time to buy and sell stocks?
When to buy and sell stocks
Let's start at the right time to sell the stock. Many people talk about buying stocks, but sales are low. So let me understand: when should we sell stocks? In general, there are four main reasons to sell stocks.
Stock Exchange in early 2021
Sell a share
The first reason is to eliminate the reason for buying part of your business. For example, many people invest in HDFC Bank because Aditya Puri leads it. With your guidance, people are confident that the bank will do better. So if that's your reason ... I'm not saying you should sell the stock if he leaves the bank. But if your reason is that Aditya runs the whole central bank and leaves the bank, then your reason is no longer valid. You must sell the stock. Therefore, it is important that you keep in mind your intentions to buy stocks digitally and/or on a daily basis.
As soon as the reasons run out, the market share may be in favor. There are many reasons to like your market share. Sell shares when you are well. This is the first reason.
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The second reason is the structural change in the industry where the company operates. The industry is witnessing a change that is completely changing, such as its revenue, business model, and so on. A small example might be. About 10 years ago, the DTH industry was a favorite. The cable will be digitized, each home will have a layout.
The government also promoted it. And then all of a sudden Netflix OTT icon, Amazon Prime. This has completely stunted the growth of the satellite dish industry. If this is happening, you would think that this industry has 10 years of growth, but a new revolution/invention has completely changed the industry. The company's past or present may be great, but if the future is blocked, it's best to leave the industry.
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The third reason is limited capital. We all have limited capital. We think Jeff Bezos and Mukesh Ambani have an infinite hat. But if you ask them, they will also say that their capital is very limited. We all have limited capital. At first, I didn't know anything. So I invested in an XYZ company. (Buy a share)
Now all of a sudden I grabbed a big chunk, but I don't have the money. I'm sure this new part is better than the old part. Also in this case, if your decision is right, you can sell your old share and invest in new shares. This is also a good reason.
Now let's talk about the obvious reason for the fourth thing. This is because the basic principles of the company are wrong / worse. Suppose you bought part of the business with less debt and more cash. But now the company has run out of money and has taken out a loan. In addition, developers have reduced their shareholding and pledged shares.
For all these reasons, the balance sheet and health of the company deteriorates, so some part of the company should be sold. This is a simple reason. So I finally said that. So these are the big reasons that point to selling stocks.
The share price has risen, should I sell? This is completely wrong. If you want to make a lot of money from the stock market, become a big investor, or change the fate of you and your family in the stock market, 2, 3 or 5 beggars will not help. But you have to look at 100x, 50x, and 20x stocks. Your stock will grow 20x, 100x, 50x, etc. When I don't sell it at 2x or 5x. Be patient If the stock price has risen and you want to sell it before it falls, this is not true. If you trust this company, give it a try.
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The right time to buy stock
Now let's talk about the right time to buy stocks. When should we buy it? Let me know when not to shop. Basically: If a company is good, you can always buy it. Companies like HDFC, HUL, etc. have never had a negative moment. (Unless anyone buys it)
These companies may not return in a few years. But with long-lasting permanent mixers like Padlight, Asian Paints can always be bought. But there are some points you should consider. If there is a good company when will not buy shares. If it's not good, you don't have to buy it. There is never a better time to buy bad stock.
The company has to be good; But when should you not buy stock?
The first point is the crowded company mentality. This is when participation increases in 52 weeks and the media covers it. If you think the company is collectively in mind and the stock price is rising so people are buying it, then this is not the right time to buy it. When the industry bubble bursts, the company will return to its original value.
Your investment may deteriorate over time. The best-selling section in the news where all the companies are performing well. You have to be careful of the star companies there. As long as you are familiar with the company and engage with the mainstream media, the share price is getting better. Maybe it's too late for you.
Best time to buy stock
The second best time to buy a stock is when a company completes its capital allocation cycle. Sounds complicated? Let's make it easy. Suppose a company has made a very good profit in 5 years and its reserves have also increased.
Suppose you have reserves of Rs 10,000 crore. You have to build a new unit for this project which will cost. 10 billion, but the required amount is Rs. 15 billion. This company has Rs 10 billion and they take Rs 5 billion from the bank.
In the next 2 years, the plant was ready. But if you look at this company now, you may find that it has no reserves and is in debt. Also, as the plant continues to grow and sales have not begun. You will not have much income or profit.
In this scenario, it would appear that 2 years ago the company had no reserves and no debt. But post that you have no income/income and you owe. This company is deteriorating. At this point, we will reject this company. But the truth is that when you reject the company. The company's sales and profits are expected to double in the coming months. If you buy a stake today, you will know this company better than others. A year later, the media will cover it, saying "this company has doubled its profits in one year." But until then, you will lose stock value. For this part, a mobile mindset will be created. You have to buy it today.
Industry growth
The third important factor is the development of the industry. If your home/restaurant has an aquarium, you may have noticed that the fish is always smaller than the aquarium. If the fish is larger than the aquarium, it will not fit. The industry is the aquarium and the fish is the company you are going to invest in.
You don't have the money to buy a big fish, but you should buy a big aquarium. When you have money, you can buy big fish tomorrow. Always keep in mind that you should invest your hard-earned money in a medium-term growth (5-8 years growth) industry. You have to believe that the demand for the industry will not decrease in the next 8-8 years and people will not stop using the product. A simple example of this is, will people use cell phones after 5 years? We can say with confidence: Yes, they will.
I'm sure my business will perform well after 5 years (in this case, people will use mobile phones after 5 years). I know the phone needs to be replaced every 2-3 years. There is no saturation in this industry as the demand for alternatives is very high. From this point of view, if I find a company in this field, I will give a green signal to this industry.
DSLR camera
Let's take a look at DSLR cameras. As phone cameras improve on DSLRs, cameras are only being sold to professionals such as videographers, cinematographers, and journalists. Comfortable users are satisfied with the phone's cameras. After 5 years, your content maybe even more so.
Will the demand for DSLR cameras be like 5 years from now? I can't bet on that. So I can't choose the company that makes the camera. It is important that you have reasonable confidence in the growth of the selected company over the next 5-8 years.
If you have considered this point, you have reduced your risks. So this was a simple article: - When to buy and sell stocks? I hope I have been able to help you Please comment below: What is your favorite stock in your investment? Also, what did you learn from today's article? We create all topics for educational purposes. We do not offer recommendations for buying or selling shares. The joy of investing!
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