Every one of us wants to make money in the stock market. But most of us couldn’t make it. Why is so that making money in the stock market is so hard? Especially when there are thousands of online course and material available to learn and apply for generating profit. How to earn money in the stock market with all your knowledge and capital is the core question for everyone who trades or invests in the stock market. Let’s discuss why most of the people are not able to make money in the stock market and what all things one should learn/apply to earn profit from the stock market.
There are two type of thoughts on share market, people who lost money in stocks prefer to be away from the stock market. They don’t want to talk about it anymore as they have already burnt their hands. There are another set of people who have mastered the stock market and want to be on top grid. So they are not willing to share their secret of success to anyone. In such condition, how the layman can learn stock market and earn money out of it.
Let’s see some basic stock market facts
- You at least should have a general know-how about the stock market.
The stock market performance is highly unstable. One day, one can earn money and another day they lost all of them. Hence there is no set rules for earning through stock market. This is more relevant when one is speculating in the stock market. Hence I always insist on the long-term investment. It prevent the person from speculate in the market and hence chances of earnings are higher than that of in speculative trading.
There are two types of personalities that works in the stock market. One is Investor and another is Trader. Warren Buffett comes under the first category. In the second category, there are people who speculate the daily price movement of the stock and try to earn daily profits.
So what is the difference between Investor and Trader? The main difference is how they see the stock price. Investor gives less importance to daily price movements as its irrelevant for him. His decision of entering the stock is not due the price movement. He is less bother about the daily price movement. Investor has done a thorough research on the fundamental of the company. Analysing the stock on fundamental parameters requires knowledge and skills. That is the reason there are only handful of people who do fundamental analysis before taking positions in the stock market.
While on the other hand, the trader tracks the price movement even for the shortest span of the trading session. Speculative day trading is too risky for a common man and should be avoided.
First of all, you need to accept that making money in the stock market is not an easy task or a part-time job. You need to invest your time and energy to earn profit out of your investment. Another point which you need to remember is, you will always lose money if you do trading. Instead of daily trading, you need to start seriously investing into the stocks.
If you chase the price, you will become RICH. but if you chase the story, you will become WEALTHY.
As Peter Lynch said “focus on companies, not on stocks”
Most of the people are doing exactly opposite to this and hence lose money in the stock market. They never go and check what the company is doing and how they are performing. Behind every stock is a company. There is a purpose for each company’s existence. The purpose is making a profit out of the capital deployed. Most investors forget that the stocks they are buying or selling are nothing but a share of the company. The investor must not forget that the underlying value of the company will determine the stock price in the end.
So as an investor, one should emphasis on what the company is doing rather what is the current price of the stock. Nowadays, buying the stock is so easy, just get an online broker, bring in money then few clicks here and there and that’s it you are done. But without knowing the underlying value of the stock, there are hardly any chances that you will make money. If you chase the price chances are that you will become rich, but if you chase the story of the company, you will become wealthy.
Follow the story, what is the future of the company? what are its products and its demand? Who are all the competitors of the company? Check all these answers before buying any share. Let’s take the example of the liquor industry in India. The industry is expected to grow at around 8% CAGR year on year.
India is the country where 60% of the population is under 40 years of age. Who is going to consume this product the most? Obviously, the younger generation. So the demand for liquor will go up in India in coming years. Secondly, the female segment is also increasing day by day. More and more females are consuming liquor and its accepted in Indian society.
About 485 Indians are currently of drinking age and another 150 million will be added in next 5 years. There is a change in the attitude, making consumption of alcohol more socially acceptable. The acceptability extends to drinking in a family environment at social events.
So investing in liquor stock will definitely earn you good returns. The beauty of the liquor is its demand doesn’t depend on any season or festival. It is a habit of an individual and is required in any season at any price. There are many states in India where liquor is a ban, but if you go and check there you will get any brand you ask for.
So investing in liquor stock will make you wealthy in the long run. Buy right and sit tight should be the approach for creating a wealth.