5 Fundamental Secrets Of Stock Investment

The stock investment has some basic fundamentals, which any investor must abide in order to ensure maximum return on investment. These fundamentals include:

Know the rudiments of stock market. You must understand how the stock market works and know how to plan to make profit. Know what it takes to make money from public offer, secondary market and private placement. Understand the principles guiding each of them. For public offer, it is advisable to always think of long term. This is because, once the shares are listed, many investors will rush to the market to sell, making the supply to be higher than demand. In this wise, price will be low. In private placement, it is another system. In private placement, only a few individual buy and really hear that it is for sale, and when it is on list and the stock is not available to all, many people will desire to buy. Therefore, the demand will be high and supply low. In secondary market it is different ball game. If you understand how each of them works, you can then plan to make profit.

Buy real companies not paper. The secret of common sense of stock investing is to remember that you are buying shares in real companies. Too many people talk about the stock market or stock as if they were real things in and of themselves. Too many investors (and their advisors) buy and sell stocks without thinking about what they actually represent. It is the companies that we buy not otherwise. When you own a stock, you own a small piece of a company. When companies grow, their stock prices generally appreciate and vice-versa. So first think about the fundamental of a company not stock.


Know when to buy. You should not just buy stock because the price is low. First know why the price is low. Every stock has its high period and low period. This is because a stock can change status in any given time for some reasons. When a stock changes its position, there is uncommon gap between the year low and year high when compared with the previous year’s low and high. So, the reasons for the gap must be clear to all and sundry. You have to research the company you tend to buy the stock by obtaining some fundamental information. The earnings (or potential earnings) of the underlying company are the major factor in giving a stock value. This is one of the basic keys to have a successful stock trading.

Understand the behaviour of every stock. Knowing how every stock behave will enable you to know when the stock will be low or high. Stock trend of price can give you an idea of year low and high. Most stock takes the behaviour of management of the company and the trend is in way the company releases results. Many companies will definitely not going to release their results immediately the quarter or the year end. Therefore, know and understand the behaviour of a stock before buying.
Know when to sell. You should have an exit period, the time should sell. Basically there are three successful exit strategies that you can adopt. They are 1. Price exit strategy; 2. Period exit strategy; 3. Closure of registry strategy. Price exit strategy is setting a target price at which one wants to exit. For instance, if you buy a stock at the rate of N25 and decide to sell it when the price goes to N45, irrespective of time. Period exit strategy is where you set a date to sell your stock after you have made some forecast. Closure of registry strategy is by mastering and applying the date of closure of register to benefit from dividend, bonus and capital appreciation.

Understanding these 5 fundamental secrets of investing is a sure way to making the most in the stock market. Let them be your guiding principle.