Savo Vukcevic lists three factors to consider before investing in the stock market

By Deepak Jain

Published: Mon 3 Oct 2022, 6:04 PM

Technically speaking, anyone can become an investor – all you need to do is take some of your funds and drop them in different stocks at random. But that’s the difference between good investors and great ones. We’re here to give you tips on how to become a great stock market investor. It all begins with building a solid foundation. From a candid chat with Savo Vukcevic, hedge fund manager at RPC Fund Management, we bring you three major factors to consider before investing in the stock market.

Company analysis

Before you shortlist companies to buy stocks of, do thorough research, suggests Vukcevic. Begin by understanding what it is that the company sells. What is their flagship offering? How are the sales doing for that offering? In how many and which countries is the company active? Next, get to know the company leaders from the founders to MDs to CEOs. Understand their background, tenure in the current company, management style, etc.

Note the size of the company – it should help you understand the organisation’s risk tolerance. Lastly, understand the company’s financial performance. Go through its balance sheet – what are the assets, liabilities, shareholder equity, and so on.

Risk vs return

From volatility to time horizon, there are numerous factors that you’ll need to explore to assess whether your strategy will provide good returns.

Time horizon is the amount of time you are planning to hold an investment before you decide to sell it. For short-term investments (less than a year), Vukcevic recommends investing in low-risk stocks. Whereas for long-term investments (greater than 10 years), the company has time to make things right if things go awry, so it makes high-risk investments possible.

Some companies provide decent returns with little to no risk. Whereas a few companies might offer massive returns, the risks, too, are equally big.

Study the industry

Analyse the industry that your choice of company is operating in. Study the performance patterns of the industry and identify sectors doing well. Vukcevic also suggests making a list of all the major competitors it is up against.

Reviewing a recently updated industry report will help you understand a company’s driving forces, success factors, and future market potential, says Vukcevic.

Deepak Jain is an independent blockchain publicist.

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