STRATEGIES TO PICK EQUITY SHARES AND MUTUAL FUNDS
STRATEGIES TO PICK EQUITY SHARES AND MUTUAL FUND: Here we shall go through the phase by which, we and our family can shift our financial status from Poor ->Middle Class ->Upper Middle Class ->Rich. This will be the ultimate, which all investors and aspiring investors look for.
The phases are
1. The essential mindset and Habits to pick Shares or Mutual Fund.
2. Key Things to consider while picking a Share.
3. Key Things to consider while picking a mutual fund.
You can’t sow a seed and look for a tree the next day.
Foremost, we have to do all the elementary steps i.e. supplying manure to the seed. Then, watering it 2-4 times per day, protecting it.
Only then after 2-3 years, we can see the seed developed into a plant. Then as year’s passes, we can see that plant into a tree. Now, we can enjoy the fruits of this tree which we have sowed it, some many years ago.
In a similar way, picking a stock or mutual fund is the same as a seed to tree. We have to preserve them and accumulate them in long run, which will yield great capital gain.
Now, we shall examine together with a mindset of a value investor, while picking a stock or mutual fund.
MINDSET TO PICK A EQUITY SHARES OR MUTUAL FUNDS:
The mindset which we are going to learn here is common for an investor who aspires to Invest in Equity – Share and mutual fund. We should develop this mindset initially during our learning phase (before investing) and should develop it in the investing phase. Here are they,
1. Remove the Greedy Mindset.
2. Don’t look at your portfolio every day to see whether it has grown or degrown.
3. Never Buy or sell based on news.
4. Learn to control your emotions.
5. Never buy a Shares or a part of mutual funds by raising a personal loan or any other kind of debt instruments.
6. Never buy a company’s Share with someone’s recommendation.
7. Always be a long term investor.
8. Match your investments with your goals.
9. Plan and invest the amount which you don’t require for the next 15-20 years.
Note: This complete subject is for Long Term Investors (Value Investing) and not for traders.
EQUITY SHARES AND FUNDS – KEY THINGS TO CONSIDER:
Investing in equity shares doesn’t mean it’s a gambling game as most people think. It’s completely becoming a partner with a company by buying a part of shares from the share market.
We have to stimulate our thinking in the aspect that it’s our own company and we are into its profit and loss. Even for a single share, the company equally provides its dividend irrespective of no.of.shares people have. Consider the company is ours and hold our shares in the long term.
Investing in equity shares and funds, it is not an easy cup of tea for everyone. It’s a learning process in a practical way. Here are a few ways you can pick your equity shares.
· Foremost, select, and do analyses for the sector you know completely, then can proceed with other sectors.
· The company should have zero debt.
· For an investor, they have to focus only on fundamental analysis of a stock like Book value, P/B, P/E ratios, EPS, Market Cap, PEG ratio, Return on equity, Return on investment, Dividend %, etc.
· Choose the companies which have zero pledged shares.
· Opt the company’s share which provides dividends or bonuses every year.
· Before investing in a company, do complete analyses of the company like their vision, mission, and pipeline work for the future.
· Always do Peer to Peer comparison of your company’s business growth, profit, cash flow, pipeline products, strategies, adoption to technologies.
· Calculate the intrinsic value for the share you are looking for and try to buy in the intrinsic interval.
· No matter, if the market is bearish or bullish, when share price comes to the most attractive price, buy your stocks.
WHEN WE CAN SELL EQUITY SHARES?
It is always advised to carry your shares without selling, you can transfer your shares to your generations unless you require the money for any emergency purpose or for dreams to accomplish.
Even if you need to sell your share, please hold it for min 20 years period, unless the company’s profit, cash flow and earnings per share is decreasing continuously for 5 years.
EQUITY MUTUAL FUNDS– KEY THINGS TO CONSIDER:
Initially, when you have the mindset of Investing in Equity, you have to start investing in mutual funds. Especially in an Index fund (where the expense ratio is lower) & Large-cap Funds. Here are some strategies to pick a mutual fund:
· · Don’t pick a mutual fund by star rating.
· Please don’t pick a mutual fund by giving a glare on its last 1-year performance. We have examined it for at least 5 years of its performance. It would be good if we do an analysis from inception.
· Always prefer Passive fund (INDEX FUND) to active funds, in the next 15 years Index fund will overcome all the active funds.
· Always check the risk and reward with the category benchmark and index benchmark. To check the risk and reward of a mutual fund, please visit the morning star.
· Prefer to choose, low risk, and high reward when compared to category benchmark for more than 5 years.
· Invest in mutual funds that have a fund size of more than 1000 crores.
· Choose mutual funds which have more diversification, so the risk will be minimized.
· Never ever change your funds very often, by seeing the current performance. Every fund will be the top performer in some specific year that can be replaced with another in upcoming years.
· We have to be very clear about the returns that we are looking for with the fund so that our mind will be in moderate emotion and will get greedy by looking at other funds..
· Importantly, plan your goals and map your goals to your mutual fund. Again, it is advised that, by having a goal for less than 5 years, don’t come to invest in Equity.
1. When it comes to Invest in Equity (Shares & Mutual Fund) you have to be a long-term Investor.
2. You have to control your emotions and remove the greedy mindset in equity.
3. Don’t look at your Share or Mutual fund performance. Just do invest at a lower price and you can see that your wealth grows like a plant from a seed.
4. Study well on fundamentals of your shares and mutual funds before investing, and don’t sell it until it deteriorates for 5 consecutive years on the parameters like cash flow, earnings per share, book value.
5. Foremost, have a mindset of value investor – Long term investors.
6. When it comes to investing in equity, invest the money that can be into use only after 20 years.
7. Analyze the risk and reward of your mutual fund with a category benchmark, preferably choose index funds.
8. Finally, don’t change your funds every year seeing other fund’s performance.