Investing in stocks is one of the most popular methods of investment in India as well as across the world. Stocks are considered to be an ideal mode of long-term investment. Companies that are publicly listed on the stock exchanges offer stocks that can be bought by investors. When you buy a company’s stock, you automatically become a part of the company and its prospective growth. Investments in stocks have proven to offer great returns for years. However, this type of investment comes with certain uncertainty and risks. The volatility of the market is challenging for a new entrant as well as an experienced investor. However, there are several parameters that an investor should be aware of before investing in stocks. Let’s take a look at some of them:
- Invest for a longer term: This is the most commonly known and important rule of stock investment. One must understand that the stock market is not a place for investors who are eyeing to make quick money. Most people think that stock market is a gamble, but it is not. It is a type of investment that could possibly garner you higher returns, but it also comes with added risks. When you invest in the stock for a longer run, it helps the stock to grow in value. Furthermore, you don’t have to worry about temporary and cyclical fluctuations.
- There are no guarantees: Although there are projections, expert opinions, market studies about the stock market, it must be noted that nothing is for sure. Investors should remain calm and not pay extra attention to the circumstances. You should focus on the core fundamentals of the company and wait for the returns. Focusing on monitoring and rebalancing of the portfolio on a regular basis is also equally important.
- Have realistic expectations: Past performance of the stock is not an indication of how the stock will perform in near future. The market could gain or lose a substantial portion of its value in a year. Hence, it is important to understand the market before having huge expectations from the stock in which you have invested.
- Have a solid reason to buy a stock: When you buy stocks of a company, you should have solid reasons for the purchase. Make sure you are taking factors such as higher growth prospects of the company into consideration before investing purchasing the stock. It is advised to look out for companies who have displayed strong earnings in the past couple of years. You should also look at the product portfolio of the company, its management, and most importantly its balance sheet.
- It’s okay to seek professional help: Investing in stocks should be done only after considering your financial goals. There is no harm in consulting a professional financial planner before making an investment in stocks. Taking help from a professional will definitely help you have a better understanding of your financial health. As you continue to invest in stocks over the years, you will eventually need to adjust and evaluate your financial goals and investment strategy from time to time.
- Minimise the fees: Make sure you are not paying a lot of money in transaction fees each time you buy or sell a stock. This affects your profits especially when you are looking forward to garner returns from trading. You should shift from one stock to another only if you are convinced enough that the new stock will give you decent returns. You can refer to Nifty 100 stock index that consists of all the top 100 companies from major sectors of the economy.visit bankbazaar for more about it.
- Don’t try to time the market: Instead of going for daily trading, you should adapt to the try and buy strategy. The market is affected by several factors such as economic, political and global. Doing market research is important however, avoid waiting for the perfect time to invest as you may lose out on more time. This in turn will hurt the amount of compound interest you will earn. Avoid selling the stocks too late once it has suffered a large drop.
There are several other factors and parameters one should consider while making an investment in stocks. Don’t let the research and study of the market trend and structure intimidate you. Hope all the aforementioned points will help you get started with investing in stocks.