When to Invest in Stocks and When to Exit Stocks | Motilal Oswal

Invest in Stocks and When to Exit Stocks

Trading is a rewarding activity for investors and searching and discovering a stock to purchase is exciting. If you find a stock and get to buy a stock, the whole process of doing this may prove to be lucrative too. This is, of course, provided the stock you buy goes up in its price. However, when do you know what the right moment is to buy any stocks? There are some tricks and hints you can follow that give you leads to buy a stock and make good on your investment. 

Timing is Everything

As is the case with most things, ‘timing is everything’. Regarding the process of trading and market conditions, this couldn’t be more true. Consider this: when you are out shopping, you are always looking for a great deal. You shop when the time is right, during holidays like Diwali and Christmas, as these are the times when hefty discounts are offered by retailers. Nonetheless, there is a time when stocks may go on sale, but investors and traders don’t seem to get very excited. Where the stock market is concerned, ‘herd mentality’ is the order of the day, and somehow, when stock prices are low and investors should ideally buy a stock, they don’t do so. Therefore, a key takeaway from this is that, after any crash or correction, you should buy stocks as prices are low and this presents a good opportunity for investment. 

Undervalued Stocks 

The decision of when to buy a stock can also be taken if you do a discounted flow of cash analysis. In such an analysis, you have to determine the potential projected flow of cash of a company, and then discount the flow of cash back to the current time. All this is done using a risk factor that is reasonable. The price target that you may be looking for is the sum of the cash flow that is discounted. If the present price of the stock you are considering is under such a value, it is probably a good enough buy. 

Doing Your Homework Helps

Most investors place a heavy reliance on price targets that are recommended by analysts and experts to buy a stock or sell a stock. The suggestions in financial newsletters may also help determine which stocks to purchase and which to sell. Nonetheless, doing your own homework is the most helpful way to go ahead with investing or selling. Research can help you to know which stock to buy and when and which to sell at the right time. For instance, if you study the annual report of a company, or reading the most recent press releases it has generated gives you an idea as to how the company is performing. You can find enough latest information about a company at its website too. 

Holding Stocks Patiently

When you initially open a trading account, you may be eager to buy and sell your first stocks and make some money. The thrill is enough to set you on the road to immediate gains, or so you may think. If you have done your homework well, and identified any given stock’s price target well, assuming that it is an undervalued stock, then you should hold on to it. The stock price may not be due for a rise in its price, no matter what experts think. This is the time you should hang on to it, waiting for it to reach its true price. 

A Waiting Game

The first thing to do when you wish to be a stock trader is to open a Demat account and a linked trading account. When you are just starting out you may not think you will hold a stock for long before you sell it. However, it can take months to a few years for a stock to realise a price that is near its target value. If you are a true investor, holding on for the long term gives you more gains, as you will find out when you invest in products at Motilal Oswal. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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