Article

The secret of success in the stock market is not what you think it is

19 Apr 2018

Most traders want to trade ‘perfectly’ in the share market, i.e. they do not want to commit mistakes or have any trading losses in their portfolio. However, there is nothing like a perfect trader; traders keep on adapting and changing their strategies to factor in all events and announcements. However, some cannot handle this and get frustrated; some even end up blowing away their whole account and consequently, even quit trading.

Most people hold this opinion that to become successful in the share market, one must be an expert in the financial domain. This is not true. While financial knowledge does give you an added advantage over others, a basic understanding of the stock market should be enough to begin with.

Here are some tips to become successful at trading are:

Self-management

Managing yourself is one of the fundamental qualities required for success in trading. Decide whether you want to trade part-time or full-time, and allocate your time accordingly. Decide on the amount of capital you want to invest. Be up-to-date about financial happenings around the world through the news and newspapers.

Diversification

Apart from investing in shares, try to consider other investment options. You can invest in mutual funds, futures and options, bonds, such as corporate bonds, tax-free bonds, and so forth. The risk of losing your entire corpus due to uncertainty in a single financial market is mitigated through diversification.

Stop considering only the money value of the trade

Do not set up a stop loss and take profits markers by considering the amount of money you will make or lose. Consider every business as separate. For example, while trading in forex, consider trading in terms of pip. Pip is a minor change in the currency pair in the forex market. It will prevent you from making decisions based on the influence of your emotions (read: fear and/or greed).

Consider every penny

Consider profits as part of your capital. Some traders, after making profits, try to gamble away their winnings thinking that it is not a part of their capital. Also, select brokers who provide a low transactional fee or commissions per order and lowest brokerage because ‘A paisa saved is a paisa earned.'

These are some basic steps which are not considered by traders as important for having a successful trading career. Traders consider only technical analysis while trading and forget the importance of self-management for a successful trading career. Technical analysis plays a significant role, but without a proper plan to execute it, traders will ultimately fail in their trading career.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

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The secret of success in the stock market is not what you think it is

19 Apr 2018

Most traders want to trade ‘perfectly’ in the share market, i.e. they do not want to commit mistakes or have any trading losses in their portfolio. However, there is nothing like a perfect trader; traders keep on adapting and changing their strategies to factor in all events and announcements. However, some cannot handle this and get frustrated; some even end up blowing away their whole account and consequently, even quit trading.

Most people hold this opinion that to become successful in the share market, one must be an expert in the financial domain. This is not true. While financial knowledge does give you an added advantage over others, a basic understanding of the stock market should be enough to begin with.

Here are some tips to become successful at trading are:

Self-management

Managing yourself is one of the fundamental qualities required for success in trading. Decide whether you want to trade part-time or full-time, and allocate your time accordingly. Decide on the amount of capital you want to invest. Be up-to-date about financial happenings around the world through the news and newspapers.

Diversification

Apart from investing in shares, try to consider other investment options. You can invest in mutual funds, futures and options, bonds, such as corporate bonds, tax-free bonds, and so forth. The risk of losing your entire corpus due to uncertainty in a single financial market is mitigated through diversification.

Stop considering only the money value of the trade

Do not set up a stop loss and take profits markers by considering the amount of money you will make or lose. Consider every business as separate. For example, while trading in forex, consider trading in terms of pip. Pip is a minor change in the currency pair in the forex market. It will prevent you from making decisions based on the influence of your emotions (read: fear and/or greed).

Consider every penny

Consider profits as part of your capital. Some traders, after making profits, try to gamble away their winnings thinking that it is not a part of their capital. Also, select brokers who provide a low transactional fee or commissions per order and lowest brokerage because ‘A paisa saved is a paisa earned.'

These are some basic steps which are not considered by traders as important for having a successful trading career. Traders consider only technical analysis while trading and forget the importance of self-management for a successful trading career. Technical analysis plays a significant role, but without a proper plan to execute it, traders will ultimately fail in their trading career.