“Behind every stock is a company. Find out what it’s doing.” – Peter Lynch.
Trading in stocks and shares is a much sought after investment. A lot of knowledgeable investors chose to invest in the stock market over other instruments like Gold, real-estate or even bonds. Why is that? Simply because stocks provide the highest potential of returns. When investments are made for long periods they yield the best returns. However, It is important to remember that the market needs to be well understood.
- The first and foremost mantra of investing in the stock market is to have a basic knowledge of the market.
- The investment you make has to fit your own financial goals. Why do you need to invest? How much are you hoping as a return? How soon do you want your returns? An investment that works for your friend or colleague may not necessarily work for you.
- Familiarise yourself with the terms of the market- Bear & Bull Market, Blue Chip Stock, Book Value, Capital Growth, Dividends, Mutual Funds.
- Assess your risk tolerance. Invest the funds that are available & would not disrupt your life.
- Avoid borrowing money to invest. As returns are always higher the longer you are invested.
- Diversify your portfolio, invest in different companies or assets.
- The decision to invest or sell should never be based on emotions. Early this year the pandemic created a dip in the market which led to panic selling by investors. The market however recovered in a few months and the investors who panic sold their stocks may have had to endure a loss.
- Investment in the market requires patience and persistence. Investing in the right shares systematically over a long term generates outstanding returns.
- Monitor and review your investments. Ensure that your financial goals are still being met.
- Have a Trading plan and know when to stop.
Stock-market is a reliable way to grow your wealth. All it requires is time, effort & staying informed. Stay up-to-date and make investments sensibly, the risk comes only when you rely on rumours and speculations.
