Investing in Share Market (aka Stock Market) is a better way to maximize your profits. It’s an investment option that helps you beat inflation and earn returns in the long run.
Stock market investing is certainly not a gamble or lottery. It’s an instrument for investment and when it comes to investing your hard-earned money you should be wise. A very well-known and simple fact of investment is –Don’t go for the investment product which you don’t understand!
Well, this rule applies to share market as well. Most people lose money in market because they don’t understand what they are doing. People go with a wrong assumption that share market is a source of quick money. Well, that’s true only if you study, learn and understand about market! But if you take short-term hops for making quick money then get ready to pay more!!
Do your homework – Search for information, understand a few basic concepts, and that is the way to go, before investing in the market. Do the research on your own so you can overcast your fear and be confident about your decision.
To make this easy, I have tried to put a few basic concepts related to equity investments in the video below:
Now, since you got to know a few basic things, the next thing is to learn – How to choose a company for Investment. Usually, it’s not the stock which helps you much but it’s the “company” in which you are investing. Understanding the market, it’s ups and down is not an easy task. Doing your home-work about a company is very important.
All companies’ prices are decided mainly by demand and supply factors in the stock market and are also affected by other factors like economic, political, international, media etc. However, share prices largely represent a companies’ financial position. A company which is in market over a longer period of time definitely reflects its strong position in market and such companies’ share prices don’t vary much. Such companies are usually large scale companies and are commonly known as Blue Chip companies.
If you are a starter, it’s a good idea to start your investment with such companies. You can certainly kick-start your investment in the company known to you.
Here are some points which should help with the Investments:
1. Applying Investment Strategy:
There are basically two investment strategies applied in current market; Growth stock and Dividend or Value Stock.
Investing through growth strategy implies investing in companies which have potential to grow into large companies so that it can deliver great profits. However, there’s a risk associated with it as such stocks are most volatile. Most of the time, investors lose their money in such type of stocks.
The other strategy used is Value Stock investing which is much safer than the earlier one. This strategy investment is made in the companies which pay dividends. These companies are mostly blue chip companies which are stable. Therefore, such companies are more appealing to the investors who take lower risk and want regular income, like, retirees.
A good mix of both strategies for long-term can help investors make a good portfolio with decent returns.
2. Making Portfolio of Stocks:
A well balanced portfolio consists of 15-18 stocks and is diversified with different sectors so that if any particular sector is going down the other sector stock can cover the losses. But it doesn’t mean that you need to buy them all at once. Making a portfolio requires time and efforts. Studying the market and its fluctuations is not easy. Nature of the stock market is very uncertain. So, taking help and guidance of an expert or a financial advisor is always advisable before investing.
3. Portfolio Allocation:
Your portfolio allocation depends on different factors such as your age, income, time and your risk taking ability. For young investors, an aggressive portfolio works as they don’t have dependents and can afford to take more risk. But a person with dependents or retirees may want to protect the investment and so allocating major portion of portfolio to blue-chip companies will be more beneficial.
4. Use SIP in Stocks:
The mutual fund SIP method can also be used in stocks. Keep investing a fixed amount in your portfolio on regular basis. Investing lump sum amount may sometimes be risky but a systematic approach can certainly help to build a good portfolio with decent returns and low risk.
5. Monitoring and Re-balancing:
Investing and holdings for long-term in shares is always beneficial. But this “buy & hold” does not mean just to hold on for quite a long-term and keep waiting for returns. It simply means hold for some time and sell when the company is frequently non-performing and re-balance your portfolio with changing market conditions. Making frequent (and necessary) changes in your portfolio is always required. There are other factors which may demand to re-balance your portfolio, for example, if your future objectives change or if you change jobs, age factors or even for changes in risk tolerance. Please consult a good advisor when your portfolio keeps growing.
Studying, understanding and then investing systematically on regular basis is all you need to invest in the market.
Ups and downs are an inseparable part of this. If you can invest by accepting this fact, then it will definitely be a very rewarding and educational experience for you!
Featured Images Source: Pixabay.com
Author: Gayathri Jagadale
Gayatri Jagdale lives in Raleigh-Durham, North Carolina Area. She is a Financial/Investment Advisor and Blogger. She has years of experience working in the Financial Services Industry. She also blogs to bring financial awareness and literacy specially in women in India. To learn more about her, visit her website Fund-Matters https://fund-matters.com/. Contact info: email@example.com
Disclaimer – The views and opinions expressed in this article are those of the authors and do not necessarily reflect any official policy. Examples mentioned are purely examples and are not real-world problems.