A stock market is a lucrative place for everyone who has skills and a thirst for knowledge. But if you don’t have a proper understanding of the stock market, you will end up losing your entire savings in one go. Almost every stock market across the world is seeing new investors, but seldom has it seen investors who come with a strong conviction to learn.
A large chunk of new investors are people who have joined the market out of FOMO. And if you are one of these people, hold your horses and learn some basics before you invest your life savings into the stock market.
Avoid Investing Blindly
Before investing your hard-earned money in a stock, the least you can do is study the company and analyze its past returns. Don’t be that person who invests in stocks on a friend’s advice. Never take any chances with your money. Therefore, do thorough research on hand-picked stocks and find a business that you think is reliable and can make huge profits for you.
Do not ever rely on the news that you may see on your google feed. This news is intentionally circulated by stock operators to manipulate the share prices of stocks. Pick good old businesses with steady revenue, and you are bound to make huge profits over time.
Stock Market Is Not A Casino
Don’t heed to people who say that they can double their money in the stock market in a week and become millionaires. What they are not telling you is that they have also lost a significant amount of money in the same bets that they claim to have made them rich.
Whether you want to make money through trading or long-term investing on Sensex or nifty, it all depends on your financial goal. But to start either of these, you need to understand the stock market and learn all the basics of trading and long-term investing.
The stock market is not about profits; there are days when your portfolio will turn red with losses. These are the moments that will test your confidence in the stocks that you have picked. If you have a strong conviction in any stock, stick with it. Let the markets fall.
Good stocks always find a way to recover themselves, and thus, you should always be patient and never sell your shares at a loss.
Learn The Basics
Many people in the stock market are making a lot of money daily, based on their power of analysis. You can also make huge profits by learning all the key concepts of the stock market, such as PE ratios, ROE, Market capitalization, and other key metrics that will tell you about a stock’s quality.
Moreover, you should also study different methods of stock selection, such as fundamental and technical analysis. You should also get a fair idea about all the rules and regulations that are levied in the stock market on intraday trading and long-term investing. A lot of people have lost their money in the Bombay stock exchange over the years due to a lack of proper knowledge of the stock market.
Therefore, one should never enter the market without learning the basics. However, if you don’t have much time to learn these technical terms, pick a good mutual fund and start a SIP or systematic investment plan.
Understand The Economy
The primary driver behind a stock’s price is the business of that particular company. To be able to predict the future of a stock, you should have a good understanding of all the underlying factors that govern every economy, such as GDP, inflation, fiscal deficit, the value of the currency, and crude oil. Moreover, you should also have a clear idea of all the things that may influence these factors.
Don’t Take Loan to Invest
You should never invest in the stock market with borrowed money. This is a very risky practice because the stock market is very volatile, and your money can depreciate very fast. There is a rule in financial planning that you should invest 20 percent of what you make. And everyone should stick to this principle to make a steady profit in the stock market without exposing themselves to the risk of bankruptcy.