We all know that from amongst the various asset classes, equities have managed to give the highest returns. This makes stock markets very attractive to those looking to make money. However not many have managed to become rich in stock markets. This is because they don’t know the secrets of becoming wealthy in stock markets.

So if you are wondering what they are, here is what you should know to become successful in stocks.

• Understand the macroeconomic and industry outlook. E.g. if RBI decides to increase the interest rates on loans, those sectors that are impacted by rate hike such as automobiles, realty and banks will be affected. Similarly recession in US will affect IT and export sectors. You should be aware of these developments. Many people tend to overlook these aspects and instead concentrate on the stock prices.
• Find out the quality of management and promoter reputation. The company you are investing in should have progressive management and the promoters should have clean background. This will help prevent scams like Satyam and Enron.
• Find out if the company pays dividend regularly. It implies the company is profit making and has sufficient cash to tide over the tough economic conditions. However don’t make this the sole reason to ignore those stocks that don’t pay dividends as the company may be very strong financially like Bharti Airtel.
• Read the company’s financial reports. It will give you an idea of the way in which the company plans to move. You will also get an idea of the company’s past performance and can catch any anomalies in the company’s performance immediately.
• Find out about the company’s financial ratios. Ratios like PE, ROE, RONW give you an idea whether it is worth investing in the company. You will also understand how the company is performing vis-à-vis its peers.

However this is just the beginning. Once you have invested in the stock, you need to monitor its performance closely to prevent nasty surprises.