Personal Finance Awareness

How to turn stock market into success

stock market

“The intelligent investor is a realist who sells to optimists and buys from pessimists.”

Benjamin Graham

Investing in the stock market is an excellent way to build your wealth. Many investors earn up to 100% of their investment beating the market. It is important to learn the basics of investing in the stock market to make informed decisions.

Let’s discuss the factors you should consider while investing in the stock market.

Set Your Goals

First and foremost, be aware of your individual’s financial status. It includes everything from debt, income to your household budget. You must organize the financial budget to meet end goals.

Ask yourself why you want to start investing? It will help you to stay invested as per your financial requirement.

Start savings for your investments

It is advised to clear all the debts before investing. You have to keep some money aside which is risk free. Even savings of Rs 500 or Rs 1000 per month can help you in reaching long-term investment goals.

Learn to Earn

If you enter the market without knowledge, a bad investment decision can leave you with bitter taste regarding investments in the stock market

You must learn fundamental and technical analysis for stock selection. Start learning to make informed decisions. It also enables you to tackle the adverse market situations

Avoid Leverage

Leverage is the borrowed money which is given to you by your broker to execute your strategy in the stock market.

This margin is provided to you by your broker or bank to buy stocks. The leverage of money varies broker to broker. Leverage sounds like an awesome tool if you are making money from the market. It leads to disaster if you are losing money. One wrong move can wipe your account completely.

Leverage is best used when you are experienced and consistently generate huge profits from the market. You must limit your risk if you’re in the starting phase. Once you gain sufficient experience then take risks as per your risk appetite.

Avoid News based Investments

You must avoid the herd mentality. Make sure you thoroughly do the analysis before investing in any stock or commodity. You must avoid investment if you do not understand the business of the company.

Control your Emotions

More than 80% of investors suffer losses because they are unable to control their emotions for an informed decision. As an investor you should always assess the data and facts before making any decision.

Lack of emotion management will destroy your well-diversified portfolio and the gains will be wiped. Control over emotions will let you last for long and create wealth as per your goals.

Diversification is the Key to Success

A well-diversified portfolio supports your individual goals as well as minimizes the risk. Most experienced investors buy stocks on mere speculation that overexposed their investment portfolio to one sector.

Statistics show a well-diversified portfolio has outperformed the market returns in the long run.

Conclusion

Stock market investments can be rewarding when the right choices are made in the long run. You must be clear on the tenure of your investment; whether you’re investing for long or short-term. You must understand what kind of risk your investment attracts.

Lastly, it’s important to keep an eye on your investment. Always review it periodically because any important happening in any part of the world does impact the financial markets. Also, keep yourself-updated to any news or financial event related to a particular stock or industry that impacts your investment.

“Always remember- Market is like women- always commanding, mysterious, unpredictable and volatile”

Rakesh Jhunjhunwala

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Till then, happy investing!