Kathmandu. Ambika Prasad Poudel, former president of Nepal Investors’ Forum and an investor, has given 10 tips to the investors to invest in the stock market. He urged the investors to pay attention to 10 things through social media.

Poudel urged the investors to understand the company, financial condition, valuation, risk and the psychology of the market not only limited to the information and documents issued by the Securities Board. He said, “How much do you read only the issues issued by the Securities Board? Also read the things issued from today.” ”

According to him, it is not necessary to be a great scholar to get long-term and sustainable returns by investing in the capital market. But it is essential to know some basic things about the market and the company you invest in.

“Instead of abusing others in the market, when you try to understand the things mentioned below, you can make eye contact with your husband or wife at home and say, ‘I have done well’. You don’t have to say that I drowned because of so-and-so and Tilana,” says Poudel.

Here are 10 things investors should pay attention to:

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1. Know what the company’s business is

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You have to understand what the company does business, how it makes money, and what will be its demand in the future. A good company and a good share price are not the same thing.

2. Keep track of financial statements

Poudel suggests that investors should be able to understand the following points in the company’s financial statements.TAG_OPEN_em_77

Income and Profit

Earnings per share (EPS)

Net Worth

Return on Equity (ROE)

loan

Cash Flow

Dividends

Accumulated Income

3. Understand the company’s valuation and market value

Should not buy shares at any price just because the company is good. When evaluating a company, investors should look at at least price-earnings ratio (P-E), price-book ratio (P-B), EPS, dividend return, market capitalization, and growth rate of the company. Investors should ask “Is the company good or not?” as well as “Is it good to buy at this price?”

4. See Company Management and Corporate Governance

TAG_OPEN_em_65 It is important whether the company has made good use of its capital or not. Investors should also be aware of whether they are not able to increase the capital by issuing right shares again and again. Similarly, they should also look at whether there is an abnormal transaction with the concerned party, how the company has treated the shareholders in the past and how efficiently the management has mobilized the capital.

5. Every sector’s business and risk is different

The business and risk of banks, hydropower, insurance, manufacturing companies, hotels and investment companies are not the same. Therefore, not all companies should be looked at from the same perspective. For example, it is necessary to understand the power generation capacity of a hydropower company, the power purchase agreement (PPA), the date of commencement of commercial production (COD), the loan, interest expense, the project cost and the condition of the water flow.TAG_OPEN_em_63

6. See the company’s future growth and prospects

Poudel suggests that it is not appropriate to make investment decisions only by looking at the company’s current EPS. We should also consider where the company can reach after three to five years. For this, the company’s new projects, production capacity, expansion plans, market, competition situation and regulatory environment should be studied.TAG_OPEN_em_61

7. Understand the Psychology and Cycles of the Market

The price of shares in the capital market does not always move according to the basic condition of the company. The fear and greed in the market can drive the price up or down a lot in a short period of time. Therefore, the tendency to buy shares because others are buying and selling them because others are selling them can be risky.

8. Manage risk

Investors should not invest all their money in one company or in one area. It is also necessary to take into account the risk while investing. In this context, one should consider the diversification of investments, liquidity risk, credit risk, interest rate risk, regulatory risk and business risk. The most important thing is to understand your risk tolerance capacity.

9. See changes to the company’s publication details

Investors should make a habit of reading the regular statements related to the company they are investing in. At least they should read the company’s annual report, quarterly report, statements published on the Nepal Stock Exchange (NEPSE), information related to the Securities Board and documents related to the company’s general meeting (AGM).

10. Maintain patience and discipline

The most difficult but important aspect of investing is patience and discipline. Even if you buy a good company at the wrong time, it can take time to get a return. Therefore, if you do not change the basic analysis of your investment or the reason for the investment, then the decision should not be changed on the basis of the daily fluctuations of the market.TAG_OPEN_em_53