There are different approaches of investment in the Stock Market. Broadly speaking, they can be divided into two i.e. short term and long term. Whatever approach you use, make sure one thing that Stock Market is not a place where you can become rich quickly. You need to be patient, committed and need to keep calm during the market fluctuations. You can use both these approaches or mix them according to your needs and circumstances. The basic aim of investing in the stocks and shares is to buy at low price and sell at high price. This is also known as capital gain in stocks. You can also earn profits by way of dividends but capital gain is important if you want to earn some serious profits.
Followings are the two main approaches to invest in the Pakistan Stock Market.
Short Term Investment in Pakistan Stock Market
Short Term investment is when you invest your money in stock market for relatively short period of time. There is no specific time period which can define short term but it can be from one month to one year. In short term investment, you search for stocks who are available in the market at lower prices or the shares who are performing well consistently. You invest your money for specific period of time while keep in mind specific targets.
Stop Loss Stock Strategy & Short Term Investment
Basically a stop-loss order in stock market is an order placed with broker to sell a stock (or in some cases buy a stock) when it reaches a certain price below your purchasing price. Stop loss strategy is normally used in short term investing to limit the loss of investor on certain stock. For example, let’s say you just bought the shares of Pakistan State Oil (PSO) at 100 rupee per share. While keeping in mind the limit of loss at 10 percent, you set the stop loss order at 90 rupee per share, which means if price of PSO falls below 90 rupee your shares will be sold automatically. It is important to note that in Pakistan Stock Market, feature of automatic stop loss order is not available, so you need to implement this strategy manually by yourself. In this way you can limit your losses.
Similarly you can use this strategy to earn consistent profits. In our example of PSO, while purchasing the PSO shares you set the 10 percent profit goal in your mind it means you decided to sell the share when the price reaches 110 rupee per share. Hence you can earn 10 percent profit from one particular trade and wait for another opportunity.
Long Term Investment in Pakistan Stock Exchange
Long term investment in Pakistan Stock Market is another approach through which you invest in particular shares for much longer periods. This period can be anything between one year to 10 years or even 20 years. If you are willing to invest for long term in Pakistan Stock Market, first of all you need to short list or choose some companies with strong fundamentals and history of success. Once you short list these companies you need to observe closely the share price of these companies. When the share price comes below certain level, you need to buy some shares. In this way you can buy those shares on consistently, regularly and gradually.
Dividend Paying Companies & Long Term Investments in Pakistan Stock Market
When people invest in the company and company earns profits, it pays dividends (certain portions form the profits) to its shareholders. But all companies are not good in paying dividends and you have to search for those companies who have history of paying regular dividends to its shareholder over the past many years. For long term investment, it is necessary to invest in the shares of those dividend paying companies. In Pakistan Stock Market, not all companies are good at paying dividends so you need to search for dividend paying companies (here is the post about dividend paying companies in Pakistan Stock Market).