‘Stock market investments yield higher returns’
Sanjeevi JAYASURIYA
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Ravi
Abeysuriya |
The Colombo Stock Market will recover and it is an attractive market
place for both local and foreign investors at present where market
performance is improving.
Sri Lankan investors have to learn from their mistakes and seek
professional help to invest in the stock market. The investment criteria
should be based on factors such as economic conditions, industry,
company performance and earnings, Heraymila Securities Limited Chief
Executive Officer Ravi Abeysuriya told Daily News Business.
Investing in stock market requires better understanding of
fundamentals and needs a clear idea of the company’s price in relation
to earnings which is commonly called the PE multiplier, he said. If PE
is relatively low of a good company, that is a good indicator to
consider investing. It means that there is greater upside of the price
appreciating as the company grows. If one picks stocks which were valued
less than the market price and invest with a clear understanding that
the stock price could fluctuate,it will help long term investment.
Stock market investments can bring in returns much higher than fixed
income investments. Fundamentally strong companies will attract more and
more investments and the price will move up when the companies start
performing better.
A prudent investor can exit the market after making reasonable
returns. They can re-enter when the company reach a certain pre-decided
PE multiplier. For this the investors need to be disciplined, he said.
Regardless of the Sri Lankan stock market been over priced compared
to other markets, there are several extremely attractive stocks that can
be picked by prudent investors. What is required is to obtain the advice
of an investment advisor who could enlighten investors on projected
company earnings and research provided by the advisor, the investor
could select the stocks that meet his return requirements and risk
tolerance, Abeysuriya said.
A market could move up as well as down based on the economic and
perceived sentiments of investors. Investor psychology plays a major
role in market movements. Investors should have longer time horizons
where it could ride the ups and downs of the market and need to pick
stocks at a time when the market is under valued and sell when it is
over valued.
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