As a small investor, the first and most important tip is that you shouldn’t go after one broker or some investors and YES DON’T trade on your own assumptions. Remember: you need to know the stock market and the present and future performance metrics of the company inside out before investing. You can select the stocks by calculating following metrics pertaining to a company:

• The P/E ratio:  P/E tells the price you’re paying for every rupee earned per share.  The higher the P/E, more attractive is the stock.

• ROE:  ROE tells us how much money the company is earning for its shareholders.  If the equity base is small and the company earns a lot of money then the return on net figures will be high: (good news for the stockholders).

• EPS:  Company should be judged via. EPS rather than DPS. Historically, good companies hold back their earnings for future investments. Also the Reserves they hold also belong to the shareholders. Higher EPS is always better for the investors.

• Income data:  Net profit to sales gives the measures of profitability to sales. If this figure shows an increasing trend, it is a good sign for investors. Higher income data than industry average is always better for the investors.

• Ratio Analysis: Different types of ratios throw insight upon the company’s relative strength as compared to its competitors or with its past performance. Ratios like current ratio, debt-equity ratio, net profit margin etc. should be calculated to better analyze the company.

The above mentioned points will highlight the corporate performance and managerial capabilities of an individual company. However, one should not forget the significance added by considerations of measure of managerial competence, progressive dividend history, industry trends in different economic sectors, political environment and macro economic policies. A stock combined with these intangible soundness (with proper price paid) shall never fail you.
                                                                                 
These factors help you to find the intrinsic (true) price of the individual stock and by comparing it with the market price; you know whether the stock is overvalued or undervalued. If individual stock is overvalued (market price is higher than its intrinsic price), you should not buy the stock and vice-versa.

Be clear of your objective before choosing the stocks to invest. Stock market always has various patterns of movements and you can gain from such movements if you have clearly set the objective. An appropriate objective helps you to choose the stock from the various listed stocks, that best accomplishes your set of objectives. Some possible objectives may be as follows:

• Maximize dividend income
• Maximize capital gain
• Maximize total gain (dividend income plus capital gain)
• Minimize risk

If your objective, for example, is the second one- maximize capital gain; you should invest in the stocks of commercial banks and you must avoid investing in finance and insurance companies because commercial bank’s share price is found to fluctuate much as compared to the finance and insurance companies. Less fluctuating stocks like that of finance companies may not cover the transaction costs. Hence, highly fluctuating stocks can provide the maximum capital gain in short run. Also, newly listed companies are found to have fluctuating share price. So, if your objective is to maximize capital gain in the short run, start investing in commercial bank’s stocks and newly listed companies. This will be a good start to your investing career.

On the other hand, if your objective is to minimize the risk, you should select the stocks which have less fluctuating features in the market. But remember that, such stocks do not provide the higher return compared to other fluctuating stocks.

But hey!! if you are confused with all these, there is a simple way out. Come to us and we will take care of you in the best possible way to maximize the return.