Which stock should we buy – large cap or small cap stocks?
We should buy high priced blue chip stocks from nifty 200 list in the beginning.so that you are not worried about survival of stocks.
You can detach list of nifty200 & nifty 500 in Google search from many websites.
Meanwhile you are observing the parallel market and getting familiar with midcap & small ap stocks day by day.
One dip in sensex / nifty will help you to check strength of any small priced stock.
Beginners are always positive for small priced shares.
they think that high price is very risky.They focus more on quantity in place of quality.
Suppose a beginner see maruti@9000.
He feels it impossible to buy Maruti but he will buy some other 100 shares@90 rupees price.
The amount invested is the same in both cases but risk is very less in Maruti because everyone is assured about quality of company.
Still one question remains,
Does Maruti have scope to go further beyond 9000?
You will have to see charts of some stocks for answer to this question –
Many traders Trapped into falling stocks like unitech which fell from 500 to 200.then 200 to 50 then 50 to 5/-
In the same way rcom fell from 800 to 13 only.
They lost their money very fast.
There was sector shift in to the market.
Sector shift means sector performed in last bull run of 2005-2008 are touching bottoms till now.
Remaining sector which were touching bottom in 2005-2008 are making new highs every quarter.
This will continue in this bull run for next 2 years.
So we need unlimited patience to earn in cheap falling stocks. Those will reduce your capital to 30% before giving 300% return.
A beginner means an investor who did not experience a full cycle of stock market will not be able to withstand such shock in any manner.
That is why,
We are suggesting to buy stocks which are breaking 52week highs and bought by mutual funds also.
But it is easy to be said than done.If you saw Maruti @900 then how will you gather courage to buy it on 3200.
It needs continuous study and observations to reassure an investor’s conviction.