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Finance: Which is the best way to learn about stocks?

Kundan Kishore, worked at Morgan Stanley

Updated Wed · Upvoted by Avinash Prabhu, MBA Finance, Visvesvaraya Technological University (2017)

I would recommend practical learning backed with famous case studies to start with if you
are planning to enter into the stock market.

Stock market learning is a never-ending process. And, there is a reason behind it.

The stock market is all about studying businesses.

In the domain of business, nothing stays constant. Business models evolve.

Technologies that support these businesses these days day changes at a rapid pace.

Competition and opportunities both remain around the corner.

And one has to keep learning about every aspect of the business where they invest.

And, this makes stock market learning a never-ending process.

To start with, you can learn about two essential tools and theories:-

1) Learn about the economy and different sectors of the economy.

2) Learn to read the financial statements of the companies.

Business <—————> Sector <—————> Economy

All organized businesses are grouped on the basis of their business nature in terms of
similar product/services offerings. And, that grouping is sector.

All sectors of businesses combined represent the economy.

So, it becomes really important that you first start understanding about Indian economy and
different sectors that are contributing to the Indian economy.

You can develop this understanding by reading basic economics concepts and industry data.

Your second job in line with learning about stocks will be now to research about winning
business among every sector.

And, this piece is called fundamental analysis.

Fundamental analysis is divided into two parts.

1. QUALITATIVE ANALYSIS (Honesty, competition, patents, brand name, etc)

While studying qualitative analysis of the company, you will learn to define the quality of the
key ingredients that are a must for success for any company in the long term. In this part,
you will not look at the size of the sector or the sales volume of the company.

Rather you will try to assess business model of the company, management capabilities and
competitive advantage of the company. You will also assess the corporate governance-
related factors with the company. (As one should invest only in ethical companies with
honest management. Otherwise, a company can give excellent performance yet
promoters and management can siphon out all the profits and not passed on
advantages to investors. This is a common malpractice in Indian scenario, so I am
categorically mentioning it with highlights)

Other non-tangible (difficult to find exact value) quality which you will also assess will be
Patents, proprietary technology, and the brand name in the qualitative study.

2. QUANTITATIVE ANALYSIS (Sales, Profits, debt, dividend, compounding, etc)

A company makes a profit by selling its products and service. And they have to keep
increasing their sales in a compounded manner.

Sales, sales and sales. Profit, profit and profit. Increasing year by year by year.

(This is the only way a company share price even rise by even 800 times)
In quantitative analysis, you will learn to find out sales and profit numbers and other
numbers which are important for smooth functioning of the business.

Well, in one line, you should learn to read financial statements.

Balance sheet

Profit and loss statement

Cash flow statement

Some people debate over the approach. Whether qualitative analysis is good or quantitative
analysis is good. I suggest as a teacher that you learn the basics of all of the above
concepts. Economy, qualitative and quantitative and develop a stable understands of

Your learning on the stock market should not end here. So, you must know a few more

Two key areas which you must be aware are:-

1. Portfolio management
2. Risk management
Need for portfolio management:-

Investing in just one or two companies stocks could be a gamble. Businesses fail.

Even if you and I together start a business, it may fail.

Even investing in just one sector can be dangerous. Sometimes a whole sector goes into a
mess for a very very long period.

So, investing in the stock market should be about creating a winning portfolio of companies
from outperforming sectors. Maybe 10 to 15 companies from 5 to 8 sectors.

Portfolio management may sound you very geeky or complicated term. But trust me basics
concept of portfolio management is easy. And practicing in the right way will make it
perfect for you.

Need for risk management:-

Let me tell you here something. Today, when I am writing the answer to this question NIFTY
(base index of NSE) is 11,856 and SENSEX is 40,240.
And, lets imaging a stock market crash like 2008–2009, where this time, Nifty and Sensex
crashes by even 50% and goes to 6000 (Nifty) and 20,000 (Sensex) respectively.

You may worry a lot thinking about this situation if you have not studied risk management.

But trust me there are tools that can protect your portfolio of stock investments even in
such market crashes.

Let Nifty or Sensex even crash by 90%. You will not lose a single penny if you have properly
studied risk management applies an instrument carefully as per your need.

And again, this may sound geeky or complicated. But, it is also very simple. (I teach this in
just one class of 45 minutes)

Well, this was all about learning to invest in the stock market.

There are more areas left.

You may want to explore trading techniques. Technical analysis, Futures, and options, and
option trading strategies.

Also, you may want to explore and learn basic market microstructure (How stock market
function, who are investors of this market, who are other market participants and many
other factors, etc)

Let me give you now a list of items you should consider to study in order to learn almost
everything about the Indian stock market.

Please check the list from below link:-

A complete course on the Indian stock market. (Course fee only 990/-)

Edit:- A total of 643 learners have enrolled. Tomorrow going to conduct live Q&A session
through multiple webinars.

Edit2:- A total of 900+ learners have enrolled. Tomorrow on Sunday going to conduct live
Q&A session through multiple webinars.

Edit 3:- 1005 learners on 27th day of the launch of the course. Many many thanks to
everyone for the upvotes, comments and share.

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Vipul Chauhan
Well described sir
1 more comment from Navin Jain

Nitol Sarkar
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