One of the highlights of India’s financial landscape is the proliferation of the equity cult that has witnessed a rush for the stock markets.
Believe it or not, according to data of the National Stock Exchange (NSE), the biggest group of investors in the Indian stock markets now are those below the age of 30 years.
Therefore, every year more and more youths are stepping into the thrilling world of equity investing, which balances the element of thrill of gains with risks of losses. Voluminous books and research papers have been written on how to maximise gains and minimise, or if possible eliminate, losses. Though it is an eternal quest, there are few thumb rules in this domain. Let’s have a look at a few Dos and Don’ts of stock market investing.
Which stock is best for beginners: Select stocks properly
How to select stock properly is easier said than done, but all investments can only begin with selecting stocks to invest. Ideally, you should always consult a veteran market strategist for advice after finalising how much you want to invest and how much risk you can tolerate. Selecting a stock involves analysing the past and future of a company as well as the industry it operates in, government’s policy in that industry etc.
How do beginners enter the market: Create a diversified portfolio
Diversification in a portfolio helps minimise risk and losses. The reason: the fortunes of all industries and sectors do not rise and fall at the same time. Select a few stocks that belong to economic cycles that do not happen simultaneously.
Stay committed to your long-term portfolio
Investing should be a long-term activity. If you are sure that you have selected the right stock with long-term prospect, just sit tight on the investment. In fact, when the price of that stock goes down, consult your advisor to buy a few more. Patience is often the key to making long-term wealth. Managing emotions while investing is also a lesson for a beginner.
Downturns are inevitable, be prepared
Even the best goalkeeper in the world concedes goals. Similarly, the smartest investor makes losses on investments. Stock prices will fluctuate for myriad reasons and you should be able to digest losses. Be careful about them keep a tab but don’t panic.
Ignore the lure of short-term trading or derivatives
As you begin to discuss and read about stocks, you would be tempted by short-term gains. Any investment strategist will tell you to avoid short-term gains and derivatives at all costs, especially for beginners. Even veteran investors or traders end up making losses on speculative investments that these entail.
(This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO or mutual funds.)
