How To Make Money From Stock Market

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There are loads of money to be made in stock market. But not everyone knows how to make money in stock market in India. In the past, people have lost fortunes in the stock market. There are only handful of examples about whom we can say that they have made stock market dance to their tunes.

The performance in stocks market is very unpredictable, and this confuses majority of people. On one day one can make money in stock market, and the other day all can be lost. If you will ask me how to make money in stock market, I will say there is no set rule. This becomes specially true if we speculate in stock market.

Best alternative to speculation is to practice long term investing in stocks. This type of investing is more reliable and can ensure long term returns. Long term investing prevents people from thinking about speculative methods. A company which is capable of generating steady long term returns are best stocks. Doing fundamental analysis of helps investors to gauze if a company is good long term buy.

Basically there are two types of personalities who play stock market. One type include people like Warren Buffett who does fundamental investing. Other types are speculators like famous Harshad Mehta.

The main difference between fundamental investor and speculator is how they see ‘stock price’. Fundamental investor gives less importance to stock price than speculators. For speculators, stock price is everything about investing in stocks. For fundamental investors, stock price is the last thing they see before buying stocks. They are more concerned about fundamental strengths of company. Once they are satisfied with fundamental strengths of a company then they shift their focus to ‘valuation’. Only while doing stock valuation that fundamental investor sees stock price. In order to make money in stock market, people must practice fundamental investing. Speculation is too risky and a common men shall avoid it till they have all tools and expertise to practice it.

In order to make money in stock market when fundamental investors start selling, that’s a buying-start for speculators. Speculators make money from stock market taking advantage of the price momentum. During bull phases when prices are only going-up, speculators make money taking advantage of up-trend. During bear phases when prices are only going-down, speculators make money taking advantage of falling-trend. For fundamental investors, making money from stocks is based on taking advantage of future earning potential of a fundamentally strong companies. A fundamentally strong companies shares its appreciating earning with its shareholders. Earning is shared as dividend income (in short term), and as long-term stock price appreciation.

For fundamental investor, making money in stock market can happen if they hold stocks for long term. But for speculators, target is to make money by holding stocks for the shortest possible time. Fundamental investors are long term players (holding time more than 3 years), and speculators hold stocks for days, week or maximum.

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