With rising inflation and soaring prices, it becomes difficult for an individual to sustain the existing lifestyle with each passing year. It is important to invest or look for alternate sources of income in order to lead a comfortable life and secure your future financially. One of the most sought after investments is the stock market, as it provides lucrative returns.
The lure of big money has always thrown investors into the lap of stock markets. However, making money in equities is not easy. It not only requires patience and discipline, but also a great deal of research and a sound understanding of the market, among others. Added to this is the fact that stock market volatility in the last few years has left investors in a state of confusion. They are in a dilemma whether to invest, hold or sell in such a scenario.
Although investment in stocks is risky in nature, it turns out to be profitable if the investment decisions are made with due diligence. If you are new to the stock market, it is important to understand the basics, types of stocks, how stock market works, and the dos and don’ts of stock market. Below information would be an apt guide to start investing in the stock market.
1. Never jump blindly into stock markets
A lot of times it happens that while talking to friends and colleagues, the discussion heads towards the stock market, and also how the stock market helps investors make big money. One might never have invested in the market, but after hearing about all those things one also decides to buy stocks. One should invest in the stock market after getting the basic knowledge about it and in accordance with one’s financial goals.
2. Stock market is not a money making machine
One must have heard the story about many investors who made their fortune through the market. Many believe that the stock market is like a money-making machine, which can turn them into millionaires over a period of time. Well, it is true that a lot of investors have made profits through the stock market. But it was only possible because they’ve good market knowledge, made some really smart choices by adopting carefully thought of strategies, and are also much disciplined in their approach.
3. Educating yourself
Before making the first investment, one should take the time to learn the basics about the stock market and the individual securities composing the market. Popular Methods of Stock Selection and Timing, such as fundamental and technical analysis. Trading basics, rules, compliances and terminology as market order types including market orders, limit order, stop market orders, stop limit orders, trailing stop loss orders, and other types commonly used by investors, margin money required if you want to trade in F&O. Gain some understanding about the market and its relationship with the economy such as market relationship with inflation, GDP, fiscal deficit, crude prices, rupees values against dollar. People lose money in the markets because they simple jump to the market without understanding the economic and investment market cycles.
4. Having realistic expectations
Hoping for the ‘best’ from investments is not wrong, but you could be heading for trouble if the financial goals are based on unrealistic assumptions. For instance, a lot of stocks have generated more than 100 percent returns during recent years. However, it doesn’t mean that one should always expect the same kind of return from the stock markets. If one feels that stocks in one’s portfolio are overvalued, it is better to switch to a relatively low value good stock.
Lastly, it’s important to monitor one’s investment and review it periodically as any important event happening in any part of the world does have an impact on our financial markets. Also, any news or financial event related to a particular stock or industry also impacts the market