Getting started in stocks? Here’s what you need to know
Stock markets have corrected off-lately and many people are looking to start investing. Major indices around the world have corrected 25 – 30% since the year start.
“Higher the risk, higher is the return”,I am sure you might have heard this. Equity investments do not guarantee returns and carry substantial amount of risk. There is no limit on upside movement and down movement of equities. Because of risk factor involved one should invest very carefully. Historically equities as an asset class have given higher returns compared to several other asset classes.
Let’s talk about the things you should know before investing in stock markets –
Why do you want to invest – Find an answer to this question which is one crucial aspect as this will help you determine the tenure you wish to hold your stock for?
Investing for Long term and short term? Seems like a million dollar question. This majorly depends on your future need and current income. Equity investing has proven more beneficial in long term. There are various examples like Infosys and Wipro which have given more than 1000% returns in a decade and a half.
Investing all in equities? Would you invest all your money into equities, or just a part of it! It is recommended to diversify across several asset classes like fixed deposits, bonds, PPF, etc. One can consider investing in Mutual Funds as they are professionally managed and people with limited knowledge of equities can benefit most out of them. [List of various investment options available]
Do your research and always be well informed about the companies and sector in which you are invested. One should also read about the national economy and global economy and be updated.
Diversify your investment. Don’t just invest in one single stock, invest in multiple stocks across various sectors.
Sometimes management plays more crucial role than numbers. Read more about promoters and their background. Find out if their vision and mission is in lines with the companies vision and mission.
Its not always possible to buy low and sell high. Buy when the time is just right. As the legendary investor Warren Buffett says ‘Be Fearful When Others Are Greedy and Greedy When Others Are Fearful’.