What to check before buying a share?
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What to check before buying a share?
It’s very easy to understand and buy
3 simple questions to ask before buying shares
Please note - Below explanation is posted taking into consideration layman, if you need fundamental analysis then visit above links accordingly.

Every buyer has 3 questions in mind before buying (investing) money in share market:-
1.What will be my returns?
2.How safe is the company? Or How safe is my money (capital)?
3.How long can I hold? Or when I will get best returns?

If you want to know the answer of these 3 questions then you should ask yourself 5 questions  before buying any company shares:-

Question 1 - Can people stop taking medicines? or Whether the need of medicines will stop in next 5 to 10 years?
OUR ANSWER - NO
Your Answer - If NO - Then buy top large capital Pharma company shares.
IF YES - Then don’t buy pharma company shares.
If you are NOT SURE - Then buy FEW shares of top large capital Pharma company shares and look for other sector.
Question 2 - Whether the use of two wheelers can stop in next 5 to 10 years?
OUR ANSWER - NO
Your Answer - If NO - Then buy top large two wheeler manufacturing company shares.
IF YES - Then don’t buy two wheeler company shares.
If you are NOT SURE - Then buy FEW shares of top large capital two wheeler manufacturing company shares and look for other sector.

Question 3 - Whether the use of Four wheelers can stop in next 5 to 10 years?
OUR ANSWER - NO
Your Answer - If NO - Then buy top large capital FOUR wheeler manufacturing company shares.
IF YES - Then don’t buy Four wheeler company shares
If you are NOT SURE - Then buy FEW shares of top large capital Four wheeler manufacturing company shares and look for other sector.

Question 4 - Whether people will stop using banks in next 5 to 10 years?
OUR ANSWER - NO
Your Answer - If NO - Then buy top large capital banking shares.
IF YES - Then don’t buy banking shares
If you are NOT SURE - Then buy FEW shares of top large capital banking shares and
look for other sector.

Question 5  - Whether people will stop eating and using consumable goods like
soaps, shampoos, biscuits, oil etc in next 5 to 10 years?
OUR ANSWER - NO
Your Answer - If NO - Then buy top large capital FMCG company shares.
IF YES - Then don’t buy FMCG company shares
NOT SURE - Then buy FEW shares of top large capital FMCG company shares and look
for other sector.

Likewise there are many other sectors, if you are interested to know then write to us
for free advice.
If you are able to ask these basic 5 questions to yourself and if you answer them honestly then you will be able to buy shares in share market of good company and you will get answer to your previous 3 questions

1.What will be my returns?
2.How safe is the company? Or How safe is my money (capital)
3.How long can I hold? (History always shows that investment in share market for longer duration has provided excellent returns and the returns did not match to any other investment)

3 Important principles to follow in share market to reduce risk and to increase returns
1. Don’t put all your money in single company shares or in single sector. If you have Rs 10,000 then invest in 10 companies in 10 or
   5 different sectors.

2. Don’t invest and forget. Every year or 6 months take a look about your invested company performance. Talk to your broker to
   get advice or watch their quarterly results.

3. Don’t panic if your share price comes down, but in fact you can average the price if your invested company share price comes
   down heavily. To follow this you must trust your company and its products. In short term due to cycle headwinds share prices
   moves down but in long term they provide good returns provided you bought shares of right company as suggested above.
How to do Fundamental (company) Analysis?
• What is Fundamental Analysis
• Find about company
• Company’s Earnings
• Current Valuation of the company
• Company’s debit status
• Important ratios to analysis a company
What is Fundamental analysis?
Basically fundamental analysis (FA) is done for long term investment which is also called as delivery based investment.
The primary aim of (FA) is to study and understand the company in which you are planning to invest your hard earned money and want to get excellent returns.

What should you look in a company before buying or Investing?
There are various aspects to look into before buying share of any company but primarily following 4 factors can help you to get most of the status before investing in it.

1.About Company -
What is the company business?
To answer this question you can ask above mentioned 5 questions. And also you can search on internet or you can ask your broker as well.

2.Company Earnings -
This is very important parameter. It is very practical to understand that if company is making good profits then obviously its share price will grow. It’s all about earnings.

The bottom line is investors want to know how much money the company is making and how much it is going to make in the future.
To find the earning status, ratio used is EPS - Earning per share

It is considered that EPS should be higher than PE (Price to earnings ratio).

Trailing EPS - Trailing EPS means last year’s EPS which is considered as actual and for ongoing current year.
Current EPS - Current EPS means which is still under projections and going to come on financial year end.
Forward EPS - Forward EPS which is again under projections and going to come on next financial year end
3.Current valuation -
This is another very important factor.
Some people invest at higher valuations (higher share price) and when the share price start coming down then they keep worrying.

Before investing one should check the current valuation of the company and then invest.
This is what happened in January 2008, most of the people invested at very high valuations and later the share prices started to correct (falling down).

To find the current valuation of the stock the ratio used is PE ratio - Price to earnings ratio.

It is considered that PE ratio should be lower than EPS.
4. Debit status -
For any company to perform well in the future it is very important to be debt free or less debit because if company is having large debits like borrowings and loans then it becomes difficult for it to plan for any acquisitions, expansion plans, take over plans, dividend payout and importantly its most part of profit may go into paying the interest and loans.

So in other words if the company is having fewer debits or no debit then they would have lots of cash in hand and they are free to take any decision in coming future.

To find the debit status of the company the ratio used is Debit ratio
Important ratios to analysis a company
 
 
 
First Learn and then Earn
Earning money in share maket  requires appropriate knowledge and experience, so it is highly advisable to gain adequate knowledge before start trading and investing in share market.
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