analyse stocks

How to Analyse Stock before Investing in Share Market?


Planning to invest in share Market in India?

Then, diving deep into this post will help you analyse the right stock to invest. After posting article on Guide for Investing in Stock Markets in India,  we got many question asking how to Analyse Stocks before Investing in Share Market and we have tried to solve many of your issues by this article. As Warren Buffett says READ..READ..READ here are books you should read in stock market.

However, before going into the details of different steps to analyse different stocks, you should understand the available types of investing.

So, two types of investing is there for you and they are- Trading & Value Investing


  • Trading centers around making successive benefits over a shortest possible time independent of the bull (rising) and bear (falling) of the markets. When rising occurs, trading deals with purchasing at a lower cost and selling at a higher cost inside a brief timeframe. Trades make profits in falling markets by offering at a higher cost and purchasing at a lower cost.
  • Trading includes entering and leaving at a limited timeframe, the holding time of the stocks is close to couple of minutes or only a few days. Individuals working on trading market make utilization of tools like specialized investigation that makes utilization of complex indicators, for example, moving averages or stochastic oscillator to figure the future value of the stocks.
  • Trading can also be hazardous and can cause great misfortunes for you in light of the tremendous instability in the stock costs. In the event that you do not have an unmistakable procedure and are not sufficiently quick you could wind up with enormous misfortunes. Market is brimming with such cases of men who lost a lot of money in trading.

Here comes the next one- i.e. Value Investing.

WARREN BUFFET How to Analyse Stock before Investing in Share Market?

Value Investing

  • According to Warren Buffet, you ought to invest into the companies that you can hold it until the end of time. The greatest favorable outcome that financial specialists get by holding stocks for such long periods is the upsides of dividends, constant rise in stock’s value levels as the related business becomes profitable in many years to come.
  • Another favorable benefit value investing offers over trading is that one gets the opportunity to ride out the changes in the stock price. Your stock price will recover in the end and compensate you with nice looking benefits. Warren Buffet also made the riches for himself by investing into great stocks and holding them for a significant time.
  • Trading helps you make profits but Value Investing enables you make wealth.

Now, as you are well aware of two types of investing, let us examine how you should analyze stock to get started with investing in Share Market in India-

1. Role of the company

Warren Buffett once said that he makes investments in what he understands. He is a great personality when it comes to the stock market and he is accepting that he does not understand all companies then we should also analyze our strategies. You must analyze the company well and for this go through the company’s website.

2. Check if the Company is Profitable 

This is another basic thing you want to consider before making any investment. Investors must properly analyze the earning that company made quarterly or annually. It is necessary to track the net income of the company regularly hence you can analyze if the company is profitable or not.

3. Properly analyze the company’s earning history

Investors must look for the company’s previous earnings and this will let you understand if the company has a good track record or not; if the company is consistent with its growth or not. You must also analyze if the company can adapt to the modern changes taking place and if it will sustain in the future or not. Such analysis of Stock will help you make most informed investment in share market.

4. How Company’s Stock is Valued in the market

It is always good to invest in a company whose earnings are growing at a steady pace and is getting huge profits. But there are other factors to consider as well that will determine the company’s future growth. Find the value of the company’s stock; there are many tools and methods to do so. You can easily get the data on the internet that is required for analysis. Investors must be aware of the value that they pay and they must analyze the amount that they pay for stocks.

5. Look for competitors

There is not a single company in the market or in a field. There are a number of competitors present in any market. Just like the Coke and Pepsi, there are a number of competitors in the market who are just looking to get ahead of one another. Investors must know with whom their company is competing. You must know if the company has a monopoly in the market and if the company is a newcomer but has innovative ideas to lead it to a bright future. You must know the answer to all these ifs and buts before making the investment. It is mandatory to analyze if the company has any foreign competition or not and if it is there then what impact it can put on the company’s stock.

6. Proper knowledge about the owners

It is not that easy to talk to a manager or the owner of any company before making any investment. But there are plenty of other ways to find out all the factual information about the company. Any small or big company no matter what niche they belong to has a website. You can use these websites to get all the information you want about the company like who owns the company, who is the manager, how long they are at that post, their background, their skills and what not. You will also get to know about the efficiency of the company from its website as well as you should do a proper research about the leaders of the company as they will lead you to analyze the total worth of the company.

7. What does the balance sheet say?

It is a very necessary thing to analyze before making any investment. Investors must be fully sure if the company is not burdened with any kind of huge amount of debt. You must also compare the earning and total debt of the company. If you are alone checking the earnings of the company then you are missing a huge factor as you will never know how the company has earned this much amount, what if it is from debt? You must also analyze the expenditure of the company and the areas where it makes expenditures.

8. Thoroughly read the company’s 10-K and 10-Q Annual Reports

Securities and Exchange Commission asks companies to file a 10-K report annually. The report will give a detailed information about the earnings of the company. A 10-Q report is also similar to the 10-K report but it is needed to be filed quarterly.

9. Check for the Red Flags

Investors must properly analyze if there is anything that causes a doubt on the integrity of the company. You can use 10-K and 10-Q reports to assess this thing more effectively. Companies should tell about the risk factors in detail that can ever cause hindrance. The company’s operations regarding the depreciation and other critical factors will let you know if the company is becoming aggressive or is mild. These factors must be analyzed before making any investments.

10. Will the company sustain in the competitive market?

If you are a serious investor, you must find out the answer to this question, as it will leave a huge impact on your overall investment. Aptly analyzing long term prospect of your stock will for sure empower you make more lucrative investments.

Final Thoughts!

On the concluding note, I hope you would have understood how to analyze stocks in India. This will for sure empower you make investments in Share Market that ensures good returns.

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