potatoes_artem_shadrin_102522

No, don’t confuse yourself with the notion that stock and potatoes have similar characteristics. What I mean to say is that the art of buying a stock and potatoes are similar.

So what do you do while buying potatoes? First you decide what kind of potatoes you need to buy? You ask yourself do you need to cook immediately or will you use it after a few days? After deciding that you go to a familiar shop (unless someone refers other shop having a better goodwill), you go to the rack which sells potatoes and then handpick the ones which are the best. Now, how do you do that? You take them in your hand, check the color, softness and size. And then you buy them. After placing them in a the bag what do you do? You go to the shop owner and ask them the price. If the owner says a price which is not agreeable to you,  you negotiate and somehow you both get to a middle ground with a particular price.

This exactly what happens in a stock market. First you decide whether you will sell a stock immediately after you earn profit or hold it for few months, After deciding that you go to a platform where stocks are traded. Search a company that has a great goodwill and start researching the stock. Your research included various fundamental parameters such as Return on Equity, Dividend Payout, Price / Equity ratio, Price Earnings Growth (PEG) ratio etc. After deciding that you will buy the stock, you place a bid and the seller places an offer. Usually these two prices are not the same. But since you are determined to buy you adjust your bid in such a way that might attract seller. This continues from both sides till both of them agree to a same price. And then finally the transaction is done.

So those who feel that buying a stock is rocket science. You are wrong. It is as simple as buying vegetables, only in the virtual world.