So, you have decided to start investing in stocks but there is a thing or two about which you are confused before entering the world of stock market? You might have heard that investing in stocks is an excellent way to increase your wealth but it is also true that it’s always a thumb rule to invest in what you know about and are sure of getting a return out of it.
Investing in stocks, on the other hand, is more of predicting and hypothesizing according to the current scenario, and for that, you don’t need huge sums of money because investing in stocks has always been about how you invest rather than how much you invest.
The lure of making big in the equity market has always attracted investors towards stock markets but making money in equities is easier said than done. It not only it requires oodles of patience as well as discipline, but it also asks for a great deal of research along with a sound knowledge of the market.
What makes matter even worse, if you are a beginner, is high volatility of stock market which often leaves investors in a state of confusion. This causes a dilemma whether to invest in equities, hold it or sell it in such a scenario.
However, if you are a beginner, it’s always recommended to restrict your investments and learn from your experience rather than going all in and while there are no sure-shot formulas to make it big by investing in stocks, there are some tips which can give you a good start in the journey of investing in the equity market.
Investing In Stocks: 5 Tips Every Beginner Should Follow
1. Don’t Invest Your Savings
Investing in stocks is always a big-risk where there is no guarantee of the investor receiving even the principal investment back. Therefore, it is advised to invest in equities after you have other savings which are more secure. Having fairly secured your future, only the can you afford these risks and make a move towards investing stock market.
2. Maintain Investment Discipline
Due to its volatile nature, stock market is prone to fluctuations which can even lead to an investor losing his money. In order to avoid losses, you should always opt for a disciplined approach to investing, Systematic Investment Plans (SIPs) being a way of doing so. When an investor has discipline and patience for monitoring his/her portfolio, chances of generating good returns are higher.
3. Manage Risk And Money Wisely
Being an investor, you just cannot control the stock market but you can surely manage your money in every transaction you make. One of the best strategies to manage your invested money is to use the stop loss tool. Whenever the selected threshold value of your investment comes between 5-15% this tool will automatically trigger an order which will release the investment in order to avoid further loss.
4. Hold A Diversified Portfolio
Investing in stocks doesn’t mean that you can go about putting all your money in a handful of companies as the market is filled with a plethora of companies from different sectors as well as fields, which offer various services. It is recommended to diversify your stocks in different industries because if one of these industries is down performing, another might shoot up, keeping your investment away from getting washed away.
Moreover, as a beginner, you should start investing in stocks of reputed companies which offer more guaranteed returns but it is also advised to take little risks with stocks of newer companies which you trust to grow. By doing this you can maximize your returns with their future growth and also have a peace of mind of sort-of-guaranteed returns.
5. Always Keep a Long-Term Goal
When it comes to investing in stocks, the equity markets are highly volatile in nature in the short term, however, over the long term period it is less risky and can offer better overall returns. Holding a stock for a longer period of time is more likely end up giving better returns which makes long-term investments much better. If you want to make it big in this industry, it is said that if you have a decent amount of money which you won’t be needing soon, invest it in less-volatile stocks, which can give you higher returns after a couple of years.
These are just a few tips that you can follow while investing in stocks as a beginner. Just keep in mind that the more experience and knowledge you have about the stock market, the higher are the chances of getting great returns.