Equity Trading is not a game. When you start reading and learning about it, you will see that it is a profession in itself. Before investing, an individual needs to know a few basics and risks associated with it. This has to be done before you start to trade in real time stock markets.
Here are 6 tips to give you a better idea about stock markets and get you started on this investment journey:
Don’t Invest Your Savings
Stock markets are known to be high-risk investments where there is no guarantee of receiving your principal investment back. Hence, it is wise to not get sucked into the lure of higher returns. It is advised to invest in the stock market only once you have other savings that are more secure. Having fairly secured your future, you can then afford risks and make a move towards the stock market.
Maintain Investment Discipline
Fluctuations in prices are nothing new within the stock market. This volatility in the market has sometimes caused a lot of investors to lose their money. Also, timing the market in such conditions becomes a tough task. To avoid losing your money, one can adopt a disciplined approach towards investing. Systematic Investment Plans (SIPs) is one way of doing so. When you have discipline and patience in monitoring your portfolio, chances of generating great returns become brighter.
Manage Risk & Money Wisely
As an Investor, you cannot control the market but surely you can manage your money in every transaction you make. Even if you have a good trading strategy it can be all for nothing. You need to have money left in your investment as well. One of the best techniques of managing your invested money is by using the stop loss tool.
When the threshold value of your investment reaches between 5-15% the stop loss tool will automatically trigger an order. This order will release the investment and avoid further loss.
Hold Diversified Portfolio
The stock market is filled with companies from various sectors and fields offering many services. Diversify your stocks into different industries. This way if one industry of your investment is down performing, another might shoot up. You should focus on stocks of reputed companies that offer more guaranteed returns. However, keep a few stocks of newer companies that you trust to grow. This enables you to maximise your profits in the future.
Keep a Long-Term Goal
Stock markets are volatile in the short term but over the long term period they are less risky and offer better overall returns. Holding stocks for a longer time period is more likely to get you great returns. Hence, it is better to invest in stocks with a long term view rather than a short term one. It is a good idea to lock in money which you won’t need in the near future. This way if you sell the stocks when the prices are down you may lose money at the start but over the years the stocks tend to catch up.
Remember – A Stock is a Company
No matter whether you earn or lose it is important to remember the basic idea behind this investment. You are investing in a company that you trust and hope will grow in future. Hence, do not get caugh thinking of stocks as a game or gamble. Your money is invested in a real company, where real work has to be done for your investment to grow. It is, therefore, important for you to find out all you can about the company and find a right estimate of its future potential. You should also consider whether these goals align with your own investment goals.