"Tips" for effective stock investment

Most investors will only care about buying uptrend or potential stocks such as DBC, GVR, KBC, FLC, CTR, PVS ... rather than evaluating the real value of these shares.

Although the number of stock investors has increased sharply for more than a year, not many investors could take advantage of the uptrend of the stock market 660 points in early April 2020 to 1,165 - 1,170 points at the end of March 2021. How should investors seize the opportunity of stock investment?

Right-thinking investment

Whether investing in a portfolio of assets including stocks, bonds or derivative products, each investor must assess its price regarding the volatility of the stock market. The VN-Index or VN30 will be a gauge as compared to the effect of a portfolio. More experienced investors can flexibly use various investment skills to take full advantage of the opportunities in the stock market. As for amateur investors, “beat the market” seems to be an impossible task.

The stock market, which bottomed out at the benchmark of 650-660 points in April 2020, would be a good opportunity for amateur investors rather than short-term and experienced ones. However, during times of corrections at the middle of January 2021, experienced investors would probably avoid risks better than amateur ones.

Occasionally, the buy-and-hold strategy is more effective than swing trading, or in some specific times of the stock market, the latter is more effective. Thus, the determination of a profitable investment strategy requires investors to have more appropriate knowledge and skills, including preparing themselves for stable psychology ahead of the high volatility of the stock market.

For inexperienced investors, it is more appropriate to choose securities that are undervalued in comparison to their real value or to invest in stocks of promising companies for the long term. On the contrary, short-term investors need to be acutely aware of opportunities that continuously appear on the stock market.

Evaluating the real value of shares

In fact, most investors will only care about buying uptrend or potential stocks such as DBC, GVR, KBC, FLC, CTR, PVS ... rather than evaluating the real value of these shares.

Penny stocks should be calculated by P/BV ratio (price to book value ratio), P/E (price to earnings ratio), or dividend rate. In addition, to evaluate and analyze stocks, investors need to consider book value, quality of short-term assets, inventory, cash flow, or assets owned by the company to make a rough estimate of whether the stock market price is really attractive.

It is realized that buying stocks at the cheapest price possible will help investors mitigate risks. If the stock was traded at a high price, it could take a long time or might never return to the initial bid price.

Expanding stock portfolio

When considering to diversify their portfolio, many investors prefer large-cap stocks in the fields of banking, steel, oil and gas, construction and building materials securities, such as VCB, CTG, HPG, HSG, GAS, PVS, CTD, etc., because these businesses have high revenue/profit growth. However, in some cases, it will be more effective to select businesses with normal profit growth, because it is easier to predict their future revenue and expose real potentiality. Especially in times of high volatility, the price of these stocks (usual stocks in utilities, electricity, water … sector) could fall to an attractive level for investment.

Meanwhile, due to weak management like costly and ineffective M&A, or disadvantages in production and business, shares of businesses in the difficult period would often drop to a too low level, which is even lower than your current assets. However, this is an attractive investment opportunity for experienced investors.

There are various businesses, which get into trouble and trigger the continuous decrease in stock prices, but they are still attractive to investors. However, a "value trap” will also put investors at risk when they invest in stocks untimely or wrongly, such as VHG, PVA, PVE, JVC, HVG, HNG ...

There is a reminder that the stock market will continuously fluctuate in the future. Opportunities will always exist in the investment field, but it is important to know how to grasp them promptly.