The fundamental approach to investment requires an investor to buy only a share when its market prices is well below its intrinsic (or real)Value and to sell a stock when its price is well above its intrinsic value. There are of course many who do not believe in this and it is likely that by now, they would have stopped with the reading of this articles. The belief is that in order to carry out this type of investment successfully, newcomers should first arm themselves by being knowledgeable in the art of investment before entering the stock market jungle. It is a sad truth that there are always far too many people who believe that it is possible to get something for nothing and that one’s fortune is always “just beyond reach” and that it is possible to get there tomorrow, if not, the day after tomorrow. The sign of this blind optimism can be seen in the huge crowd that gather outside every “Four Digits” Shop or off-course betting centre every saturday.
It is hoped that the readers are convinced by now that the stock exchange is neither a casino nor a betting shop. There is a lot more to investment that listening to one’s “friend” or to rumours. Successful investment requires a good understanding of the basic principles of investment as well as strong nerves to resist the sentiment of the crowd.
The second half of this articles has the objective of helping you to develop your knowledge and ability in this area.It will neither be easy, nor will it be brief but, hopefully it will always prove to be interesting and stimulating. The individual chapters in the remainder of this article are designed to be increasingly more difficult. Therefore, it is important you should get into it right from the start and digest the earlier chapters completely before proceeding further. In this connection, if any of the readers have any comments or queries, as a publisher will be only too happy to receive them. However, we cannot guarantee that all your letters will be answered individually but at least, you can be assured that your views will be taken note of. Some of the questions raised may be responded to in my Comments column or email , all comments made will be useful for future editions of this article.
The first few chapters of the second half of the articles address themselves to the answering of what may appear to be very simple questions. Let me assure you that some of these questions are likely to be extremely difficult to answer satisfactorily, even by the experts though they may appear simple at first glance. It is vital that investors should have some idea of the answers to these questions before they start meddling with the stock market since they deal with the whole basic philosophy of the fundamental approach to investment. It is usually at times when one forgets these simple questions that has often led individuals to being ensnared in the madness of the crowd. All investors ought to ask themselves simple questions such as:
“What is the purpose of an investment?” “Why do I buy shares in the first place?” “How much profit can I reasonably expect?”