The attraction towards big money has always driven investors into the equity market. However, making money through investments in equity securities is not easy. Because, the stock market return depends upon your knowledge on the best companies to invest in stock market, equity market charts, equity market research etc. In addition, it is also very important to have patience and discipline.
Now, Let’s Look At Some Of The Golden Rules Of Investing In Equity Market:
Don’t Panic With Short Team Volatility:
It is very often that small investors get panic even with short term movements in the particular stock. Be confident in your investment and build your portfolio strong. Also, gains of a long-term investor come from a completely different market movement, the one that occurs over many years.
Do Not Run Behind Penny (Low Priced) Stocks:
The common misconception is that there is less to lose in a low priced stock. Just keep in mind, there is a downside risk in all equity securities irrespective of its market price. Probably, the company with higher share price would be more safe than a penny stock because of more regulations. So, think twice before you invest.
Do Not Give Control To Your Emotions:
Fear and Greed are something which you should control when it comes to investing in equity shares. We always hear about making money quickly in stock market and it makes us invest in un-known companies. All you need to do is stay focused. Choose the best companies to invest and do your own research on technicals and fundamentals of that stock. Do not speculate and create huge positions in the futures without analysing the risk associated with it.
Follow A Disciplined Investment Approach:
In the past it is seen that even the great bull runs has given the bunch of panic moments. There are people who lost money in the bullish trend. However, the investors who put in money systematically, in the right shares and held on to their investments patiently have been seen generating outstanding returns.Hence, it is prudent to have patience and follow a disciplined investment approach besides keeping a long-term broad picture in mind. Also Read: Mutual Funds – All You Need to Know About This Care Taker!
Invest In The Business You Understand:
Have you invested in any particular stock? Then, you should know what business they do! Do not invest blindly in anything and everything. You should know that you are not investing just in a stock, you are investing in a business. So, it is very clear, that it is a MUST to know their business.
Take Informed Decision:
Most of us might not be aware of advanced research like equity charts or in-depth equity research; however, you cannot ignore the basic and fundamental analysis of the stock you are planning to invest. Investors generally go by the company name, well that’s not at all the right way to invest in equity market!
Do Not Be A Market Timer:
What it means? Timing the market means, trying to catch the tops and bottoms of the market. Trust me, there is no example of people consistently being successful doing this! One thing that even Warren Buffett doesn’t do is to try to time the stock market, although he does have a very strong view on the price levels appropriate to individual shares. So, be careful.
Think About Having A Broad Portfolio:
Portfolio Management is one of the key to success in stock market. Diversification of portfolio across asset classes and instruments is the key factor to earn optimum returns on investments with minimum risk. Level of diversification depends on each investor’s risk taking capacity.
Set The Expectations Right From Equity Market:
Unrealistic assumptions and expectations from your investment may lead you towards the failure. Hoping for ‘Best’ is always accepted; however, make sure that you understand the probable risk and return for your investment. You need to realise that the rate of return for the money you invested depends upon the stock and sector you invested. Because, there are stocks which has given 400 per cent return since listing and you cannot expect the same from all!
Invest Only Your Surplus Fund:
We have come across many people who borrowed personal loan to invest in stock market. Is it right? Absolutely WRONG! No one can be hundred percent sure about the Stock Market. It is not necessary that you will lose money in the present scenario. Your investments can give you huge gains too in the months to come. However, make sure that you have surplus funds which you can afford to lose.
Investment in equity market is always exposed to uncertain risks. It is our responsibility to consider above factors before investing. Blaming the market during loss is easy; however, at the end we are the ones who will lose money! So, take wise decisions, have Patience and ride the Market!!