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How to Choose the Right Stocks to Invest in for Long-Term Profit ? August 01 2022Stock Market Education

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How to Choose the Right Stocks to Invest in for Long-Term Profit

Every investor starts his journey in the stock market with the expectation of good returns. However, his success in the market depends on many factors. The most important factor is his decision making regarding the selection of stock for the long term. The beginners and even the experienced investors are always confused about how to select stocks that would be profitable in the long run. In this article, we list down some important pointers that will help you in becoming a successful long term investor.

· Identify Companies Worth Investing

Develop a strategy to find out companies that have the potential to generate high profitability in the future with their business. Follow the performance of the sector and its indices. In case you prefer any sector or industry, you may filter out companies and study their fundamentals. The most important aspect of finding companies good for investment is having the knowledge to study balance sheets, profit loss statements, etc. If you are not good at the fundamental analysis of a company, you may seek the help of a financial advisor.

· Follow News and Latest Developments

You must closely follow the financial and market related news. When you track the latest news and events you will know what to expect in the future and which companies can perform better in coming times. Listen to the interviews, read informative blogs and articles to find good stocks for the long term. Doing research based on news and events may even help you to find hidden gems in the sector that may give high profits in the future.

· Find the Fair Price of Stock

After listing down companies that are good for investment in the long run, check the prices of the stocks. Evaluate the fair value of the stock and find whether the company is under, over or rightly valued. You may use different ratios to evaluate the current price of the stock. Some of the parameters that you may use include price to earnings ratio, price to sales ratio, discounted cash flow modelling, dividend yield, etc.

· Margin of Safety

When you pick a stock for investment always check what is the margin of safety you are getting. Suppose you estimate a fair price of a company and you bought it as it was trading at a lower price than your estimation. In case there is a fall in stock price, it would not hamper you much as it was already below the fair price. This is called the margin of safety. Stocks that have stable earnings and a positive outlook require a small margin of safety.

· Check Corporate Governance

Before investing in any stock for the long term check the corporate governance of the company. A company with clean promoters and good corporate governance is always a safe bet for investment. While a company having unethical management and board of directors should be strictly avoided.

 

The above mentioned are some of the tips that may help you in selecting the right stocks for investment in the long term. When the investment period is for the long term, always remember that it will require you to be disciplined and patient. By using the economic as well as fundamental indicators, you will be able to find hidden gems in different sectors. To learn the art of finding stocks and educating yourself on various aspects of long term investing, you may join webinars held by Indira Securities. You may even consider opening a demat account with us. Stock market Webinars held by our experts and professionals will help you in learning the skills and knowledge required to become a successful investor in the long run in the stock market. 

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