Happily ever after is only an expression, after all. Would we know the ever after? We wouldn’t, of course. But here’s a tough tip – we might not know it, but we for sure can be prepared for it. Can we not? How is the big wonder? Well, there is mostly an answer to all the hows. One such answer is through investing. New or old to the stock market, the stock market has been known to be a way to a bigger and brighter future. While you work hard, hustle, and go through sleepless nights, the stock market is a way that you can watch your money grow. In simple words – the stock market is where you can invest some money and in a matter of time expect to receive more. You could be a beginner with a few rupees, or even a few thousand rupees – there are always some ground rules, or should we say fundamentals that you can use. In this article, we will talk about them.
Could there be Risks in the Stock Market?
There are obstacles lurking around in every opportunity, but the end goal or the destination is only met when surpassing these obstacles. One such risk involved with the stock market is that you could lose your money. Now, let’s talk about precautions.
– If you are investing in high-risk stocks:- you should only be investing what you have extra.
High risks mean high rewards, that’s a given. We all know the riskier the job, the better the money. The same applies here. But, don’t be blinded by the high rewards and overlook the risks that are involved with it. So, invest what you know you can afford to lose. You cannot be investing what is due next month, can you? Especially if you are looking at the other side of the investing, and that is the loss. This is a deal of expanding your portfolio, and your opportunities – but with the safety ropes.
– If you have a low-risk appetite, it’s best advised you keep investments on the safer side.
The first thing you need to think about before you can step into the stock market would be how much you can risk. If you can only risk a little, choose accordingly. There are high, low, and moderate risk stocks that would match your needs, and that’s where you have got to think more wisely.
Now, you might know that – there are risks in the stock market. So, given the pros, there are a few cons that you would also have to deal with.
Fundamentals of Stock Market Trading for Beginners
- The Right Investment Gives you the Right Money
While you are thinking about stocks, are you just thinking about how to buy your favourite brand’s stock? Unfortunately, that’s not how it works. We all wish we could just stick to things we like. If it were as easy said as done, things would be a whole lot different. Now, if you are still sticking to investing in a single stock, irrespective of what was mentioned in the point above, you might want to know that there is quite a lot that you would have to consider.
You can ask anyone and take up more research about earning per share, PE ratio formula, management, advantages, product, promotion and so much more. Also, this will come under your umbrella because once you buy the stock, you will also be part owner of all this, wouldn’t you? So make sure you study the company you are about to invest in. When you do this, you can look at what’s about to come in the near and far away future.
If you have looked at a stock that has been performing quite well for two years in a row and choose to buy it. Who knows. In a matter of months, it could drop because of various causes. These causes could be anything. It could be economical – you can’t do anything about that. It could be internal, such as management and process – in this case – you could have done more research. So, since you’ve made up your mind to buy that stock. It’s also entirely your job to do the due diligence. So, get ready for a whole lot of analysis and research.
- It’s Best you Keep Away Individual Stocks for a While
Choosing a mutual fund or ETF is much better than choosing a whole stock – let’s see why. You might have looked at friends and colleagues making big bucks over a stock. But you know what most people miss? That sometimes, mere luck is looked at like a skill. This isn’t true. Just remember, your single stock cannot always be MVP. Which rises now, has a very big chance that might also fall. Now, you might be wondering, what about the whole bunch of people who actually make so much money over a stock. That’s true. We can’t deny the truth. But, you know another truth? The people who were rewarded also had their share of losses. You wouldn’t know this because it isn’t usually a habit to talk about the losses we had on the road to success. Well, now you know. What are you going to do about it?
Unless you are an expert, as a newbie, it’s best for you to stick to mutual funds and ETFs over single stocks that have a high risk down the road.
Also Read: The New Roadmap of Dogecoin
- Say a Big No to Putting All Your Eggs in One Basket
The importance of diversity is seen here. Bet you’ve heard about portfolio diversification. Well, if you haven’t. That’s okay. Portfolio diversification is when you spread your investment into different investment vehicles. If you are wondering why. Why is it said that you never have to put all of your eggs in one basket? The same reason. When you diversify your investments, you also diversify your risks. This does not just mean stocks. Investments, on the whole, can be from government schemes, real estate, and stocks. But since we are talking about stocks alone, let’s look at a deeper concept.
You are investing some in high risk, some in moderate risk, and low-risk baskets. By this, not all of your money is at stake when markets fall, and you have something to rely on. This can also give you growth in terms of investments and security in terms of financial stability.
- Are you Trading or Investing?
Now, don’t be shocked at this question. You can be either or both. But it’s up to you to know what you are. Are you in for the long term? Or in it for the short term? Traders use the advantages of the market, and buy stocks for low and sell them high in the short term. Investors, on the other hand, are focused on wealth creation and are in it for the long term. Make sure you know the answer to this before stepping into the Market.
- Don’t take Commissions and Fees Lightly
Well, these days, everything is done online. So it’s investing and trading in the stock market. Your online brokers and Demat accounts are going to cost you in some way or another. Well, you can either look at them as a small amount taken out from your profits or you can reduce them. Now, reducing them means you would have to compare the platforms you can use and find which one suits your preferences the most.
- Take a Crash Course- Invest Time Before Money
It’s not a bad idea. Read more books, journals, and articles from the pros who have already been where you are right now. It’s more important than anything to invest your time in learning more about the market before you can actually start investing your money.
It’s possible to start investing in as little as Rs. 500. But the key point is – starring. It could give you starring jitters, but that’s okay. It is also the point that lets your money grow. But firstly, you’ll have to do your homework on how the market works and much more.