What kind of stocks should I avoid?

There are four type of stocks you should avoid for investing:

Low Liquid Companies:

Some equities may have steadily declining prices, yet their owners are unable to sell them simply because no one wants to acquire them. It can be very difficult to leave a company with few liquid assets. Don’t put money into businesses with little liquidity.

High Debt Companies:

Don’t put money into businesses with a lot of debt. As a general guideline, avoid investing in businesses with significant debt on their balance sheet and a debt/equity ratio higher than 1.

Falling knife category companies:

Never try to catch a knife that is falling! It is never a smart idea to invest in businesses whose stock prices are steadily and considerably declining (such as Geetanjali Gems, Yes Bank, PC Jewellers, PNB, Suzlon Energy, etc.). There is always a justification for why the market is punishing the company and why the prices of these stocks are dropping.

Additionally, you can research thousands of listed companies on the Indian stock market. If you are not taught on how to do it, trying to catch a falling knife usually results in harming your own hand.

Low visibility companies:

In the Indian market, there aren’t many businesses whose information isn’t readily (and transparently) accessible online or on financial websites. Usually, this applies to small- and micro-cap firms.

Investors may find it difficult to research such obscure companies. Additionally, there is a potential of information tampering if the data cannot be cross-checked or if the reference sources are questionable. Therefore, stay away from businesses that are obscure.

Share and Enjoy !




Leave a Reply