Again it's an alert - Stock Market is a Business
Again it's an alert - Stock Market is a Business
The Stock Market is not a place to Speculate and the stocks are not just numbers on Paper !
They are the value of a Business. We have the idea that if we buy or sell a share of the Stock Market that is all. But keep in mind that there is an industry behind it. Like how we are buying tomatoes and potatoes in the Vegetable market, we can see lot of things it are industry dependent.
Things like Agricultural land, Farmer, Cultivation, Labour cost, From Cropping to Harvest, then Harvest to Storage, Transportation, Pricing and Profits, more than Value added products are industry based. The same would reflected in the Stock Market for the stocks.
This is the value what the world's Richest man and Value Investor Warren Buffett says,
“I am a better investor because I am a businessman, and I am a better businessman because I am an investor.”
Generally, the value of a company or business is in its ability to generate revenue.
A Business which is profitable is always worth it. So, we have to buy the company that gives continuous profit growth. Not just a brand, as well as not to stagger in Debt. The Company should be able to convert it's leverage to good profits, otherwise it will cause poor growth.
The benefit of Time Value of Money and Power of compounding - both are very important in our Personal Finance lives. The Stock market gives us that both opportunity in an effective way. It will create an enormous wealth in the long run.
If you have a 100 rupees, it does not reflect the same value after one year due to inflation. If the inflation rate is 7 Percent, then 100 rupees worth of product will become Rs. 107. If it is said to be 10 Percent, then it will become Rs. 110. It is called the Time Value of Money.
Do you know how much it is worth today for 100 rupees a year later ?
After one year's 100 rupee is worth today is Rs. 93 only, if the inflation stands at 7 Percent. After 5 year's 100 rupee - Rs. 71 worth today. It is called the Discounted Value or Present value of the Future amount.
So, the money you have hidden under the cot in your house is not worth it later. It is only worth if it is invested and generate an income which is more than Inflation. Risk pertains everywhere. Doing nothing is also risk at sometimes.
Time value of money and Discounted value both of these are essential for an investor. We use both of these in our daily lives.
If our neighborhood asks for any Financial help, should we react or help quickly ? The answer is 'NO'.
Only by knowing their Family Situation and financial circumstances, we would go for help. The same will apply for House construction, Spouse selection on Marriage and Career. But only in the stock market are we in a bit of a hurry. We are in the quick mood to rich quickly, even not learning about the fundamentals for a few months.
Learn to earn is the primary in the Stocks, Money investing comes next apart !
Kindly share your views / comments with a smile :)
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