How to Select Stocks for Building a Strong Wealth

Posted by Rashmi Dey on April 8th, 2022

In India, many people are willing to invest in the stock market. But many beginners can\'t decide which stock they should pick before investing.

Before you pick a stock, you should do some homework. Because when you invest in any stock, you become a part of that company.

And it is necessary to analyse the company\'s fundamentals, its assets, and many more.

So today, let\'s discuss How to Select Stocks for Building a Strong Wealth.

Ways to select Stocks for building a Strong Wealth

1) Have a Financial Goal

Before investing, this is the first and foremost thing you can do, to decide the purpose of investing in any particular stock.

Before jumping into the stock selection, you must decide whether you want to invest in the long-term or short term.

We know many people\'s goal is to make a lot of money. Still, some people are willing to invest in stocks for retirement plans or capital appreciation.

These three goals have different approaches to picking a stock. 

Intraday trading is for those whose objective is to earn a lot of money in the short term. In intraday trading, you can buy a stock and sell it on that particular day if you see profit in it.

You need to do a lot of stock market research along with right information about the company before investing to avoid loss.

Long term investors who are willing to invest for their retirement plan can buy low-risk stocks. 

Investors looking for capital appreciation are looking for the stocks of companies in their best early growth years. They are willing to take a higher risk for the chance of big gains.

2) Look at Debt to equity Ratio

The debt-to-equity (D/E) ratio is used to evaluate a company\'s financial strengths. It is calculated by dividing a company\'s total liabilities by its shareholder equity.

All companies carry debt. The companies like Amazon, Flipkart, and Apple also carry debt.

You can use the Debt equity ratio as an indicator to choose the right stock for investment.

According to experts, the number should be 0.3 or less for investors with the lowest risk tolerance.

For example, you are willing to invest in the stock which belongs to the construction industry. 

In that case, we can consider a high D/E Ratio. Still, if the ratio is very high, it is difficult for the company to make a profit.

3) Closely follow the financial and market related news

Yes, this can be a plus point if you regularly read or listen to financial and market-related news.

Sometimes this kind of news is speculative, but it is suggested that you should analyse the news and do your own research.

Any important event that happens can also affect the stock market. This can help you find, analyse, and adjust your investment.

Hence, you need to monitor your portfolio and constantly affect the desired changes.

Suppose you can\'t review your portfolio due to time constraints or lack of knowledge. 

In that case, you should take the help of a good financial planner or someone capable of doing that.

4) Follow Public Interests and Events

You want to be wealthy, and you should choose stock wisely. Looking into public interests, you can diversify your portfolio.

The public interest in particular products leads to high market demand, and the industries grow immensely.

For example, when there are festivals like Diwali and Dhanteras, people buy gold, a commodity. 

When there is a high demand for gold and silver, the prices of gold increase and the investor who has invested in commodity stock makes a lot of profit.

So this is one of the crucial factors to consider when your purpose is to become wealthy through investing.

Takeaway

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