Biggest dilemma for Investors : Charming Stocks or Fundamentally sound stock
One common dilemma we have seen in investors while selecting stocks is, whether to buy fundamentally strong company or to buy a charming company.
With charming company we mean those companies which are highly traded and often comes in highlight for making quick capital gain. It maybe because of sudden announcement they make or a trend in the industry.
However, by fundamentally strong companies we mean those companies which give consistent dividend, are big in size, thus there is rarely any speculations.
Even though everyone knows fundamentally strong companies are the best buy but people often end up grabbing charming stocks in order to earn quick profit. We don't stop you from buying the charming stocks, but one needs to make sure that they are quick enough to sell those stocks before those stocks lose their charm.
One recent example for charming stock can be Green development bank or maybe API Hydropower. They were once the most attractive companies and made it to "top gainers" almost every single day. However, those who didn't sell it on time maybe in huge loss today. They might even have to wait for looong time to recover their principle.
However, fundamentally good companies are amazing for the return they provide. They give constant rate of dividend, which is quite predictable. Since the return is predictable, they are rarely speculated in the stock exchange and thus price is constant. Anyone buying it needs to wait for long run and can earn multiple folds with the dividend they give.
Some example of fundamentally good companies can be NTC or maybe RMDC. The price of these companies is generally constant and so is their dividend. And the best thing is, even if you buy these companies at an over-priced rate, you need not worry as you have an assurance that you can recover your principle and also earn profit, with the dividend they provide. Further, the capital gain, if you receive, will be a bonus.
Take away : Buy right, Hold tight
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