On this website I've written a post: Basic Principles of Fundamental Analysis - Part I and Basic Principles of Fundamental Analysis - Part II. The writing on my website raises some questions that are quite simple, but actually these questions are quite "inviting problems" for potential stock investors.
The question is this: "Mr. Heze, if you invest in illiquid companies and are still sleeping, then how do you sell them? If they are not liquid, there will be very few people."
This question is indeed quite interesting because it cannot be denied that if you invest in completely illiquid stocks (even if the company looks like a prospect), then this really makes investors nervous.
So, should investors buy illiquid stocks? If you ask that, I will answer: As long as you have LONG TERM belief, why not? Investing is different from trading. In investing, you buy shares not necessarily tomorrow or in one week or two months it will rise.
In other words, the principle of investors is to be able to steal a start. If investors buy shares when the price has gone up high, it means you are behind.
Back again to 'long term belief'. Why do I say that as long as you have faith, you have to dare to buy illiquid stocks for investment? This is what Warren Buffet does. One of Warren Buffet's principles is: Decide your own investment.
This means that you do not need to follow other people when buying shares. If you have faith and analysis, then you have to decide on an investment, even though at that time no one was looking at the stock you bought.
If the company has good performance and good prospects, sooner or later people will glance at the stock. When the stock moves slowly, more and more people will be interested in raising the price of the stock. Finally, illiquid shares eventually become liquid. Got it here?
To find good stocks that are worth investing in (minimum 1 year), you not only have to analyze the financial statements, but you also have to analyze the business prospects like how. And the most important thing is that you have to look at the public's response to the product and the government's sentiment towards the sector.
As an illustration, I once discussed KBLI shares when the price was still in the 300's. You can read my article again here: Long-Term Prospect Stocks: Cable Sector Review. And until one year later, its share price had risen to 800.
"However, I often find stocks that have been illiquid in the past, and have remained the same for years." you mumble
It must be admitted, it is not easy to find prospect stocks, but these stocks are still classified as sleeping stocks. Because there are so many considerations that must be made if you want to buy sleeping stocks for investment.
That's why I don't recommend investing if you don't understand fundamental analysis well. Fundamental analysis I mean: Your ability to find hidden pearls (the ability to find potential stocks that are still not liquid).
If you feel unsure about buying less liquid stocks, it's much better if you become a stock trader or invest in dividends. Also read: Stock Investment Strategy: Dividend For Living
