What Factors Should You Consider When Investing In Stocks?

If you are more of a contrarian investor, you would perhaps look for stocks which have been ignored by the market or are currently out of flavour. However, that alone is not the reason why you should invest in such stocks. It’s very important to determine whether such an adverse environment for the concerned stock or sector is temporary and whether it can bounce back. So, understanding the sector and the specific product is very important, and one should be able to gauge the future potential, as well, i.e., how well it bounces back depending on the management quality and its past track record in downcycles or when faced with adversity. If the balance sheet is stretched, we need to evaluate it based on the future cash flows—whether they would be able to overcome the stress or it will be a downward spiral. A company having a moat will always be preferred to a commoditised one,...