When it comes to investing in stock markets, most people are eager to make big gains in the shortest possible time. Investing in stock markets can lead to possible windfall gains over a period of time.
It’s also possible that there are big losses if the investments are done without taking proper guidance and research.
It’s absolutely essential that when it comes to investing in stock markets, you have to do the initial research instead of blindly following tips to buy certain stocks from unreliable sources.
Initially, you must have some knowledge about the stocks you intend to invest in or trade. The areas to focus on would be to understand the company’s core business, study at least the company’s previous year’s results and check on the management’s credibility.
Additional research on which sector the stock belongs to and the growth prospects for the company and sector in the coming quarters and years can be a very helpful indicator for a profitable investment.
Once you have done your research, it’s advisable to focus on the few key things that you are doing right in the initial stages of your investment journey in equity markets.
The next step would be to build on this foundation by sharpening your investment skills and enhancing your self-confidence.
One of the tricks is to identify what you are doing right and make sure you continue to do it over and over again.
When you decide to invest in stocks, do make the investment plan. One needs to decide initially the capital you can invest and if it can be done at periodic intervals. You also have to decide the time period for which you want to do the investments in stocks. You also need to set a goal with regard to the returns you expect from your investments.
One of the biggest mistakes that most investors make while investing in stock markets is to have unrealistic expectations as regards to their returns from investment in equities.
They do end up making risky investments on the basis of tips from unreliable sources and end up losing their capital.
In the process of making too much money in too short a time, they end up taking unreasonable risks. They invest in risky stocks or make large investments with capital taken on loans and end up losing heavily when their investments go wrong.
The industry average returns can be a prudent target to keep in mind as far as your returns expectation is concerned in the initial stages of your investment journey.
Do reach out to professionals who have considerable experience in investing and will be available to handhold you in the initial months of your investing journey. The pitfalls of stock markets can be better managed with a helping hand from seasoned professionals who have gone through the ups and downs of equity markets.
The cost implications of executing your buy and sell trades with regard to investments and trading. It is very important to understand and know exactly what the brokerage charges are & various taxes that you will have to pay for executing your buy and sell trades. This will help you to manage your cost of executing trades better and also help you in executing profitable trades.
It is absolutely critical to be aware of the risk involved in investing in the stock market. There is no such thing as guaranteed profits in equity markets. The various financial instruments in equity markets like buying in the cash market, futures and options, etc have varying risks. It’s advisable to take appropriate guidance from professionals and understand the risk involved in each such investment in the stock market.
Take proper precautions, make investments realistically in equities. If you can control your overconfidence while making investments, you can make profitable investments in the longer run.
That instead of timing the market, the time your investments remain in markets helps you to make multi-bagger returns. It’s always seen from the experiences of all well-known investors that trying to time the market is very difficult to achieve regularly. At best, you can get lucky in a few investments and trades.
It’s always seen that wealth creations happen when you are able to invest for a longer period of time.
Most professional investors do suggest that there is no easy way out to wealth creations in stock markets. You may end up making a few profitable trades by using shortcuts like tips, source based buying, etc. However, these don’t last long.
Wealth creation in the stock market happens when you have a systematic investment plan. Plus you have a disciplined approach to investment and trading.
It is quite often said by all experts that it’s not prudent to put all eggs in one basket.
The market by its nature is very unpredictable and uncertain. To ride your investments to profitable outcomes would require you to diversify your investments. Diversification helps to minimize the risks of major losses because of any negative news in a particular stock or sector that you hold.
As a prudent investor, it’s very critical that you have a periodic review of investments you have made in equity markets. This helps you to make course corrections and maximize your profits in the longer run.
Always reassess your investments, particularly to identify the investments that are not doing as per expectation. This helps to take Professional help in time and to improve on the investments if any need arises.
Last but not the least, Be Calm and composed!
It’s very important that you are calm and composed while making your investment decision. This helps you to avoid committing unnecessary mistakes in trades and investments. When your mind is confused and you are under pressure, you tend to make errors with regard to your decisions about the execution of your investments and trades.
The philosophy to be followed while investing in equities markets would be:
“Accept what the markets give you”
And
“Don’t impose your will onto the markets”
