Posted on September 20, 2009 by Nayab Naseer

An investor who hopes to make money in the stock exchange should spend time researching on the fundamentals of the company. The fundamentals include the past financial performance, the assets of the company, the debt to equity ratio, the background of the promoters, the products the company sells, the company’s plans for the future and the like.

The investor should also have an idea regarding the external factors that shape the business. The competitions the company faces or is likely to face in the future would also give a good indication as to the growth prospects of the stock.

Thus, it is essential to do considerable homework before investing in a stock, and once invested follow up research on these same parameters is required on a regular basis.

One common mistake many investors make is following the herd and investing blindly based on hat others do. Such a heard mentality caused many a investor to loose millions in the dot com bubble in the late 1990s.