10 Rules for Trading

Nutan Gupta

25 Sep 2017

Untitled Document

There is no dearth of information on trading in the stock market either on the internet or in newspaper columns. However, there are some golden rules which every experienced investor follows. These are:

Having a Trading Plan:

Like with everything else, having a plan is important. Without it, an investor may invest in trades that have little chance of salvaging the invested money, let alone making profits for the investor. Therefore, an investor needs to have a plan as to the sectors which he will prioritise for investing, the amount of money that he will invest and also the time for which he will invest. With a wide range of websites offering platforms to trade in the stock market, investors need not look anywhere else.

Tracking current events that affect markets:

A smart investor always keeps track of the political atmosphere in the country because it mostly affects the stock market. A welcoming policy from the government might send markets into a bullish run while an unpopular move can send the markets into a tizzy. A wise investor reads the pulse of the market before going ahead.

Not keeping all eggs in one basket:

This is a classic advice given to all new traders. It is to prevent investors from a situation where they don’t have money to take advantage of the ever-rising opportunities in the share bazaar.

Unable To Track:

Baseless trading hardly yields any results to profit the investor. A prudent investor keeps track of all market trends and buys and sells according to them.

Using Technology:

Investors in the information age have a bulk of data at their disposal. If they use it according to their needs, it can work to the best of their interests. Various trading websites have a huge trove of data ready to use.

Learning from other investors:

It is always important for new investors to follow the leading traders and learn how they go about their business. This can also be done by reading books, articles and news reports. Because trading can be very risky, you need to know as much as you can. The only way to do that is by research.

Don’t try to play the market:

Gaining mastery over the rhythms of the stock market requires a lot of time and effort. Therefore, it is wise to never try to time the market. Share markets have their own way of working themselves out. Hence, one who tries to play the market is rarely successful.

Not being put off by initial losses:

Investors, in the beginning, may be put off by losses but it needs to be understood that trading in stock markets require time, patience and effort to benefit from. Therefore, initial losses should be treated as stepping stones to larger profits.

Don’t over-trade:

So many of investors get caught up in over-trading thinking the moves they make are proportional to their potential benefits. However, this is unfortunate as traders should be disciplined enough to understand what is the right time to make a move.

There is no golden rule:

No wand will be able to wave all your problems in the stock market. There are only tools, skills and instruments that can be applied to your maximum advantage. All moves in the market must always be based on this knowledge.

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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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10 Rules for Trading

Nutan Gupta

25 Sep 2017

Untitled Document

There is no dearth of information on trading in the stock market either on the internet or in newspaper columns. However, there are some golden rules which every experienced investor follows. These are:

Having a Trading Plan:

Like with everything else, having a plan is important. Without it, an investor may invest in trades that have little chance of salvaging the invested money, let alone making profits for the investor. Therefore, an investor needs to have a plan as to the sectors which he will prioritise for investing, the amount of money that he will invest and also the time for which he will invest. With a wide range of websites offering platforms to trade in the stock market, investors need not look anywhere else.

Tracking current events that affect markets:

A smart investor always keeps track of the political atmosphere in the country because it mostly affects the stock market. A welcoming policy from the government might send markets into a bullish run while an unpopular move can send the markets into a tizzy. A wise investor reads the pulse of the market before going ahead.

Not keeping all eggs in one basket:

This is a classic advice given to all new traders. It is to prevent investors from a situation where they don’t have money to take advantage of the ever-rising opportunities in the share bazaar.

Unable To Track:

Baseless trading hardly yields any results to profit the investor. A prudent investor keeps track of all market trends and buys and sells according to them.

Using Technology:

Investors in the information age have a bulk of data at their disposal. If they use it according to their needs, it can work to the best of their interests. Various trading websites have a huge trove of data ready to use.

Learning from other investors:

It is always important for new investors to follow the leading traders and learn how they go about their business. This can also be done by reading books, articles and news reports. Because trading can be very risky, you need to know as much as you can. The only way to do that is by research.

Don’t try to play the market:

Gaining mastery over the rhythms of the stock market requires a lot of time and effort. Therefore, it is wise to never try to time the market. Share markets have their own way of working themselves out. Hence, one who tries to play the market is rarely successful.

Not being put off by initial losses:

Investors, in the beginning, may be put off by losses but it needs to be understood that trading in stock markets require time, patience and effort to benefit from. Therefore, initial losses should be treated as stepping stones to larger profits.

Don’t over-trade:

So many of investors get caught up in over-trading thinking the moves they make are proportional to their potential benefits. However, this is unfortunate as traders should be disciplined enough to understand what is the right time to make a move.

There is no golden rule:

No wand will be able to wave all your problems in the stock market. There are only tools, skills and instruments that can be applied to your maximum advantage. All moves in the market must always be based on this knowledge.

Have Referral Code?