The Stock Market (also known as the capital market) is a market where securities are bought and sold. These securities are of capital nature in that the amounts involved in them are large and that they form the capital of companies, whether owned or borrowed.
Stock Markets exist in almost all countries in the world, however, many people are oblivious as to its working and trends. Investments done correctly can result in fortunes being made in the stock market, while the opposite can result in financial problems. In this article, we are going to state some guidelines about investing in the Indian stock market.
1. Avoid the Herd Mentality
We listen less to ourselves and more to others: how many decisions have you taken on the advice of your relatives, family and neighbors? That is exactly the thing to avoid in the stock market. Always remember what the market genius Warren Buffet said, “Be fearful when others are greedy and be greedy when others are fearful”. If you find that everyone around you is investing in a particular stock, you’d do well to avoid that stock.
2. Don’t Try to Time the Market
Don’t try to time the market, which is do not ever attempt to predict the prices of shares and invest your money according to that. Market prices are highly volatile and consistently unpredictable. You might hit the bull’s eye once or twice, but that is more of a happy accident rather than the rule.
3. Be Disciplined
It is important that you follow a disciplined investment approach. Do not panic unnecessarily because the general history of stock markets show that investors who patiently held on to their shares despite market panic gained outstandingly in the long run from those same shares. Hence, it is prudent to keep the long-term picture in mind and to be disciplined in your investments.
4. No Place for Emotions
The stock market is no place for emotions and uncontrolled fear and greed has led to the destruction of more than one investor. Thus, it is important that you keep your heart at bay and think through your brain while making investment decisions. It is very important that you don’t believe the absurdly high claims of some vanishing companies and invest in them. Remember, if the profits and dividends promised by a company are too good to be true, they probably are so.
5. Have Realistic Expectations
High hopes are not good in life and in the stock market. Rational and reasonable expectations with regard to investment returns is what would be beneficial, not daydreams about being a millionaire in a day. Market history worldwide shows that returns over 12% are rare and occur due to pure dumb luck, so keep that in mind.
As previously stated, the stock market is a volatile place and has been more so after the global crisis in 2008. Thus, you should have a good idea about it and then invest. These tips for investing in stock market will help you to get the necessary footing and generate decent return on investment. Happy Investing!