Education Series | April 06, 2017
The lure of big money often throws investors into the lap of the share market. Among them, while some turn out to be the successful investors, others wane to achieve their goals. That’s not only because of investing in the share market and earning a sizeable profit is a tough nut to crack but because of the lack of patience, discipline, and adequate research work during the investment. Added to this, the volatility of the stock market for a past few years has left the investors in a dilemma, whether to buy, sell or hold the stocks.
However, although no sure-shot formula has been discovered for a successful trading yet we list down a few essential tips and tricks for investing in Indian Share Market, which may lead to the path of success.
Tips & Tricks
• Avoid having herd mentality: In India, buyers’ decisions are majorly influenced by the actions of their acquaintances, neighbours, friends and relatives. If everybody around invests in one particular share, the investor too invests in the same, without considering its pro and cons. Needless to say, you should do your own research and invest accordingly. To quote Warren Buffet, the greatest investor in the world, “Be fearful when others are greedy, and be greedy when others are fearful.”
• Do in-depth research: Proper research is the key pillar of a successful trading in share market. But not many investors are found to follow this tip. In most cases, the investors go by the name of the company without checking their past performance and reviewing the annual report. This, however, is not the right way. Go through the annual report of the company, analyze it, and study well in advance to determine whether investing in its share will be a profitable deal for you or not.
• Set long-term goals: Set your financial goals before investing your hard-earned money in the stock market. Determine the reason for investing in equities and shares and also when do you expect a return, whether after 6 months, 1 year, 2 years or longer. In short, before you invest, you should know the purpose. For instance, if you need return within a few years, then consider another investment, as the stock market offers no certainty that all your capital will be available when you need.
Determining the return that you will need in future, calculate how much amount you should invest at present.
• Invest only the surplus: No matter how exciting it sounds when you are promised to make a huge profit through share trading, remember that the returns are not guaranteed. So, do not invest the money that you might require for your livelihood. Invest only the surplus amount which you can afford to lose in the market and which will not disturb your daily living.
• Do not time the market: Investing in stock market can benefit you only when you have a long-term investment planning. You must have come across the news like, the stock prices have risen high. This happens when more and more investors buy stocks, and when they start selling, the prices fall back again. Hold your stocks in that situation. Remember, if your stocks are of a good company, the price will certainly rise eventually.
• Practice a disciplined investment approach: Not many investors have been watched doing this, but those who put in money systematically and in the right shares, and hold on to the investments patiently have been seen generating brilliant returns. Hence, it is advised to have patience and disciplined approach towards investment.
• Create a broad portfolio: Diversified portfolio across various assets and financial instruments pave the path to more investment returns with the lesser risk involved. So, create a broad portfolio, which can include aggressive portfolio, defensive portfolio, income portfolio, speculative portfolio, hybrid portfolio and bottom line.
• Hire a successful stock investment company in India: One of the primary steps to stock investing is hiring a premium stock broking company. Make sure you check their credibility, their past record, and the success rate before signing on the dotted lines. While you can ask for a reference from your acquaintances or you can search online to find the best broking house for you.