Track the Rally-Bull Market amp; Advantage of Investing in Frontline Stocks.
Defense is the best form of offence in the stock exchange. When the market is in the rallying phase, when the investment pundits are convinced that the Bull Run is in the offing, it is time for the investor to think actively. Here is an opportunity to take advantage of investing in frontline stocks. After the period of recession, Bull Run has to follow, if past history of the market is any indication.
Identifying the frontline shares is a tough issue. Is the company of your choice in a position to maintain the competitive advantage over a long period? Even if the past history of the company is perfect and encouraging, in the era of rapid technological advances, anything can happen, and companies may find the going tough and over a period relegate to the background.
The rules of the game are same, the principles involved are identical; the difference in ordinary shares and frontline shares is, in the later case the investor expects the market rally to firm up and calculates the long-term advantages. Profit margin is the ultimate issue. For example, if you buy a share for Rs.2000 (whose subscription value is Rs.100), the calculation of profits is done on Rs.2000/- The investor is convinced that the share will fetch profit twenty times more and for that he is willing to wait for some years.
The time of rally after the recession is an ideal phase to spot the frontline shares and do the exercise of investment. The shares of such companies may be available at reasonable prices. Such shares being liquid, they are easy to trade. Provide stop loss limit to each front line share, without exception. Bull Run times are good but quite uncertain too.
So, expect high dividends and capital gains by investing in frontline stocks. In times of grave financial crisis, frontline companies face serious difficulty. With business ethics at low standards, with some of the industrial giants going into liquidation, the investor cannot take the merits of the companies for granted. In the liquidation proceedings the shareholder has the lowest priority as the company needs to pay to its supplier of goods, creditors, debts with the banking institutions, salaries of the employees and government tax dues first.
Do not be carried away on the basis of the figures and expansion plans provided in annual reports of frontline companies. Just like investing in Kapitalanlage Immobilien, there are several factors that you need to consider. Make authentic assessment and take the advice of an experienced broker. Frontline companies and long-term benefits generally go hand in hand. Only the investor needs to get a good entry price.