6 Tips To Start Investing In Stock Market

Nutan Gupta

14 Sep 2017

Untitled Document

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.

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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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6 Tips To Start Investing In Stock Market

Nutan Gupta

14 Sep 2017

Untitled Document

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.

Have Referral Code?