1. #1

    Join Date
    Aug 2011
    Lahore, Pakistan
    Blog Entries

    Right stock, at a right time, for a right time

    If you ever thought that buying equity shares is a sure shot way to wealth creation, then it is time to pause and ponder. Equity is one of the most risky asset classes which also has the potential to generate good return. But just buying any equity share wonít result into wealth creation. There are lots of research and analysis that goes into buying equity shares. It is important to buy shares of a good and performing company, at the right time, for right time frame. If there is any imbalance among the three, equity may not generate desired return and in some cases also cause loss for investors.

    What is the meaning of buying shares of a good and performing company? This basically means an investor has to select a good share from a bouquet of shares which are available for trading. This is a humongous task. Most of the people do this activity by trial and error and in some cases even become successful. In spite of this, the rigorous process of stock selection cannot be belittled. In fact, appropriate stock selection technique creates an investor like Warren Buffet. So is it possible that an investor himself may select a stock which is best suited for his requirement? The answer is yes only if he is ready to spend time to do research and analysis. The other option is to look for an expert or go for the mutual fund route. Surprisingly this also does not guarantee success.

    Right time of entry is also critical for buying a stock. There are some phases in which a select group of companies or sector donít do well. Even if you select a good stock during this time frame, it may so happen that the stock does not provide desired return. Some stocks often categorized as defensive stocks are example of this. In consistently rising market, defensive stocks do not provide good return.

    So getting a combination of right stock at a right time is not easy but imagine if you end up getting that. The last step to make money from the stock you need to hold the stock till right time. More than market timing of entry, holding a stock till right time and then exist is much more important. So till what time should you hold a stock? Generally till the time on an annualized basis, a stock is giving you return which is atleast equal to marginally better than risk free return.

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