Investing In Value And Multibagger Stocks

Worth spending some time in reading this.
*

Investors employ a multiplicity of techniques in choosing shares. What is
common amongst the various methods is that they don't always work. The
suggestions made in this discussion combined with common sense and good
judgment should help to hone your stock selection skills.

The first step in the selection process is asking yourself a few questions
to help clarify exactly what you want and expect from your investment. *It
is immensely necessary to endeavour to find out the amount of risk you are
prepared to take. Look back, and recall how you felt when you incurred some
financial losses*. Such memories, with some amount of honesty should help
you to find out your level of risk tolerance.

Companies on the stock market are grouped on two main basis: in terms of
similarity in size, and on grounds of carrying out the same activities
(sector grouping). If your analysis shows you are risk-loving, then your
focus should be on smaller companies or growth companies which are generally
riskier, with potential for higher returns. If you happen to be the risk
averse type or you want a share with minimum maintenance, then you want to
consider large organisations, which have a lower tendency to go bust and can
also serve as more reliable source of income. Such firms are known as 'blue
chips'. Target shares in industries or sectors that will be positively
impacted on my political ventures and economic trends.

After considering the category of companies you want to deal with, you
should begin inspecting the dividend yields and P/E ratios of the companies.
It is a good idea to be on the look out for companies with reasonably high
dividend yields. A P/E ratio between 7 and 10 is very much recommended.
Remember that a P/E ratio is only useful when compared to others. Consider
companies with P/E ratios that are lower than those of competitors in the
same industry, and also lower than the previous years' figures. The yearly
sales and earning per share figures should ideally be increasing over the
previous years. It's a good idea to consider growth companies that have
fallen on hard times, but shows signs of future recovery.

*You should also decide how long you will be holding the share for*. You
will thus be on the alert, when it is time to get rid of the share. *Higher
returns will be earned when a share is held for a minimum of 5 years*, with
substantial savings in dealing expenses. This, nonetheless, does not mean
that duds should not be turfed out before their planned disposal
dates. *Accordingly,
a winner should* *not be gotten rid of just because it has had a decent run*.
Tact should be exercised before selling shares and it is good technique to
keep an eye on the next share to grab, once the old one is gone.

*Do not catch a falling knife*. Although it is good practice to buy cheap
shares, some shares suffer a free fall in price, and stay cheaper and
cheaper with the passage of time. These should be avoided. Also eschew
shares recommended by newspapers and tipsheets. The explanation for this is
that market makers also read newspapers, and by the time you lay hands on
the share, every advantage it has would have been already siphoned out by
professional investors, especially, if you're considering a blue chip. If
you want to try your luck in securing a winner you may have to rummage
financial statements of companies that have capitalisation less that Rs 100
crs. Such companies do not attract professionals, hopeful you can beat the
market here.

It is almost impossible to outperform the market extensively. What you want
to avoid is losses. *A long-term goal of tracking the market,* *or better
still performing slightly better than it is quite realistic and dignified*.
You should decide to what extent you want to get involved with the
management of the share. Be prepared to buy investment management, when
necessa