DECISION MAKING CRITERIA OF SELECTED INVESTORS IN EQUITY MARKET
Other terms for equity market are stock market or share market. The equity market stands for a share of ownership in a company. The higher the number of shares, the higher is the share of the investor in terms of company profits and assets.
The two types of equity market are the primary and the secondary equity markets. In the primary equity market, stocks or shares are offered through initial public offer by the company to institutional or commercial investors. Bought shares through the initial public offer will be exchanged in the secondary equity market. This is done through the stock exchange. This second type of equity market is volatile, sometimes incomprehensible especially to the neophytes and difficult to forecast.
According to Warren Buffet, an investor should buy stock and hold on to it as long as possible. This means that an investor should purchase stock from an outstanding and reputable company and should not sell out the stock before all the up trends and down trends are normalized.
To do this, an investor must be on top of stock market news, abreast with all factors that might influence the trend of the stock market.
A lot of the markets distinguish their basic level on their performance expectations, not on their past performance. A component of the stock market, the small cap stocks, are small companies whose stocks are not that promptly exchanged in the stock market. Most of the times, traders handling these accounts advise their investors to hold on to their stocks as investor reaction on small cap stocks are quite slow. It follows that if the stocks show an upward trend this year, the next year will most likely continue the upward trend.
Some investors choose stocks from small companies that demonstrated an upward performance the year before. However, due to the present financial volatility, some investors choose stocks from larger companies. Some investors also buy a larger share of stocks from larger companies and buy smaller share of stocks in smaller companies. However, whatever one chooses, he must base his decisions on dollar fluctuations, reductions, the economy and corresponding inflations.
Keeping abreast of the stock market trends and factors that might affect the trend is the investor’s path to successful investing. Keep informed of the largest stock market movement; and keep an eye on the end result of the company’s financial data as well as its ranking.
There are also important criteria that an investor needs to know before investing. First is the amount of money available for investment purposes. This includes any capital investment made on other stocks. It is strongly suggested that the fund to be allotted for investments should be funds that will not be needed in a span of five to ten years. This is also to avoid liquidating the stock immaturely due to the necessity for capital.
Second is the maximum amount that an investor can spend to add to the number of shares. Common ratio is twenty percent of the total amount of investment.
Third is to know the least amount that an investor would want to invest on a certain stock. Common ratio is from three to seven percent of the total amount of money available for investment.
Fourth is to set the maximum limit or utmost exposure an investment can handle and that the investor is secure with. If an investor has investments in different parts of the global market, he or she should allot a certain percentage as maximum investments in every market. As an example, a maximum percentage will go to the European market and another maximum percentage is allotted to the US market.
Common ratio can be up to full investment or whatever the amount an investor is capable of. The purpose of the limit is to prevent over exposure in the market.
Fifth is deciding which market an investor would want to increase his investment provided that the investor would want to increase his investment and he has the financial capacity to do so.
It is strongly recommend by Stock Trend Investing that investors should only invest or increase their current investment if there is an identifiable clear bull trend in the market.
Credit:ivythesis.typepad.com
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