How to Take Share Buy Decision

Share is the small proportion of the capital of a company. Both private and public limited companies have share capital. But the only public limited company can issue their share in public through IPO (Initial Public Offering) to raise their share capital. Basically, the shares of the public limited company are traded in the stock market. Buyers and sellers are involved with this market through brokers (commission agent). There are thousands of millions of investors investing a large amount of money in the capital market. It is an investor’s responsibility to choose right share of a right company so that they would get a benefit (capital gain and dividend) from investing.

Question is what are the things an investor should consider before investing in the capital market through purchasing share/stock or how to take share buy decision?.

how to take share buy decision — Share/Stock Buy Decision

There are several factors/things that need to consider before investing in the capital market/stock market through purchasing share/stock of a company. These factors are:

Calculate the present value of all future benefit. If the present value is more than the current price then buy the stock/share. On the other hand, if the current market price is more than the calculated present value then definitely sell the stock.
To reduce the risks of investment do not forget to choose a company from a different industry. So that you can diversify your investment also make sure that you pick the right company stock
Check the growth rate of the company in which you want to invest. You can get growth-related data from the annual report or in the stock market/capital market
Choose stock/share which company has a lower price-earnings ratio
You can also choose stock which provides higher EPS (Earnings per Share) compared with other companies
If you have financial knowledge then check the financial statement (cash flow statement, income statement, balance sheet) of the companies over the period of time. Cash flow will help you to check the cash inflow and outflow. And from other financial statements, you will get profit/loss, assets & liabilities related information. It is your responsibility to check ever information that may have an impact on the future earnings of the stock/share
You also need to consider the current market rate and the current economic condition of the country
Never buy share without knowing anything or if anyone influences you to buy a share

These are the some of things that you can consider before investing. If you analyze properly and invest in the capital market then there will be less chance to lose your investment. Never try to gamble in the market, although many people think that buying and selling a stock is one kind of gambling.

Written by

Md. Nahian Mahmud Shaikat

Student of MBA

Institute of Business Administration (IBA)

Jahangirnagar University

Email: [email protected]

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