Thousands of investors lose their money in stocks every day but a lucky few are able to make a fortune. Have you ever thought what makes the winners different from the losers? Are stock market winners programming their brains differently?
The short answer is- yes. Those who have successfully managed several winning stocks understand that you have to change the way you trade to make it big. These people know the recipe for making the best moves when the time is ripe. Do you want to learn these secrets too? Go on and read this post to the last word.
Ask yourself the right questions
The first question you should ask before investing is- can a company really make consistent sales for the next 5 to 10 years? If yes, this could be a nice stock to invest in. There are some great companies in the market now that have a good business model and a target audience too.
However, their market potential is not big enough. It is highly likely that their target market will be exhausted with their offerings very soon. In such a case, these companies will either have to move away from their business model and try something new or vanish forever.
Apart from this, you also need to ask if the company’s management is good enough. Many great ideas and potentially awesome businesses fail simply because of clueless management. Even if the product of a company is crude, it could still make a mark in the market if the management is serious about getting results. Given the wrong management, even the biggest companies fail.
The company’s sales and profit margins
These are the next things you should understand about a company. How much sale does the company generate as of now and what are their projections for the future? Check if they have an able sales team to pull off this effort. If not, you should not touch this company’s stock. Double check your findings by checking the company’s profit margins. If the profit margin is too low, your money is not in the right hands.
Is the company secretive?
A company that does not talk freely to its investors, it should ideally not be trusted with your funds. You should think twice about the motives of the organization. Most of them have shady management and even worse business practices that will eventually lead to its demise.
Most of the promotional stocks fall in this category. They make lofty claims on one end to keep you feeling good about a stock but never reveal substantial details about the company. This is a red flag for the investors. Don’t buy into such companies. Some investors invest in a specific stock because they fall for the optimistic language in the company’s annual report. Don’t do this and be more prudent.
Making money in stocks is not a cakewalk. The more informed you are, the better decisions you will take. Avoid impulse behavior and don’t panic, no matter what the condition.