Investing simply means to allocate money in expectation of future benefits. Benefit from an investment is called a return. The return may be in form of a capital gain or a loss after the sale of an investment, unrealized capital appreciation or depreciation, and investment income such as dividends, interest, rental income etc. Investing is a great source of Passive income.
There are many fields where investing generates returns. This includes, Real-estate, Rent, Stock Market, Gold, Business, etc.
A stock market is a market for buying and selling of stocks/bonds/securities/ that represent ownership claims on businesses. In short, buying and selling of business ownership percentage. It is probably the cheapest asset available to people from any division. While investing in stock is an easy job in case the business grows, one needs to constantly analyze them. Here are 7 tips the beginner stockmarket investors should follow to be successful in the stock market.
1. Start Small
As the saying goes: the journey of a thousand miles begins with small steps. Every beginner needs to start investing slowly in good stock. After investing keep track of the invested stock and find out the pattern of the market. Eventually knowing market pattern will boost investors confidence and return as a whole.
People interested in the share market doesn’t jump in because of the myth that it requires a high amount. But that’s not the actual case. Clarify your facts before you enter. while it’s unlikely but invest the money you have no problem losing. Another important thing: Buy low, sell high.
2. Diversify Your Portfolio
Another infamous saying is, ‘Don’t put all your eggs in one basket’. Likewise don’t invest in one type of business stock. Invest in the stock that you have required knowledge. Select the best stock from various field and invest in them. This will diversify your investment and minimizes your risk. If one stock fails to live up to your expectation, then another should be able to cover for it.
While the stock legend Warren Buffet doesn’t believe in diversification but diversifying and increasing additional investment in the good stock is recommended. Of course, you’ll also need to sell the stock with the poor return to maintain the portfolio.
3. Invest in Blue-Chip Companies
Those companies who have been in profit for a long time and paying high returns are called Blue-chip Companies. They are the highest dividend-paying companies as well. Investing in these companies are known to be less risky.
Investing in those companies with stable paying equals to great investment. Existence of these companies will also make it possible for us to invest in other risky stock with growth potential.
4. Avoid Blindly following the crowd
Stock prices are volatile. Stock prices are prone to the movement of crowd psychology. When the crowd feels secure and intoxicated, the stock market increases every day. On the other hand, when the crowd feels afraid and depressed, the market tumbles. Although, the crowd moves the market, following the crowd may be risky and dangerous to your
investment. You need to be one step ahead of the crowd if you want to be a winner in the game.
The investor who understands the other’s emotion is a sheer winner in this game. So it’s important to sit back and analyze the market pattern and investors behaviour instead of following the herd. This helps in profiting from your investing decision.
5. Know your investment
To be successful in the stock market, you should know what you’re getting into. Before an investment decision, investors should thoroughly understand the return and risk factor of their possible investment. Do enough homework or research before investing your money.
Whether you are a fundamental analyst or a technical analyst, each research is vital for successful investment. The style of research may differ among investors, but it is required if you want to input your hard-earned money into the stock market. Likewise, it is also important to invest in those stock whose business model you’re familiar with. Farsightedness is essential for investors.
6. Invest regularly and Continuously
Separate little amount from your income for investment monthly or tri-monthly if possible. To increase your assets, instead of using the returns from investment on personal usage, re-invest them in good stock. Keep this cycle updated. Of course, you can use it if it is unavoidable. But it is beneficial to re-invest them as it is a part of passive income and you can make do without them.
Share market is volatile, it has ability to make good stock in fair price available for you. So have a lookout for these stocks and invest on them if it’s doable to you.
7. Long-term Investing
What separates investors from traders is their long term strategy. Investors value the compounding effects of the stock returns. For an average investor, having a long term vision of the stock market can be quite rewarding.
An average person cannot spend his time following market prices every day. So, every decision should have sufficient reason behind them. To make a huge number of decisions requires extensive research and study, which may not be possible for an average investor. To find a good stock in which he can invest for a long period of time is an ideal strategy. As a result, they may not be distracted by the endless volatility of the market. This will eventually prevent investors from making mistakes from market timing.