HOW TO INVEST IN SHARE MARKET

Stock market is a money-earning platform for those who have the right knowledge to tap the movement of stocks and gain lucrative returns.

If you wish to learn the working of stock market, and how to invest in it, then here are a few tips to follow:

Identify your Investment Requirements:

Before placing the order on the stock market, investors must determine their needs and limitations. While determining the requirements, users must consider present as well as the future needs. The same rule is applicable while determining their limitations. Investors must list their incomes and deduct all their expenses along with debt obligations (if any) to find the investible surplus. An important factor that will determine the share market investment strategy is the risk aversion of the investors. Individuals who do not wish to take higher risks would prefer investing in fixed deposits and bonds. Many investors fail to consider their tax liabilities while investing.

Determine the Investment Strategy:

After understanding the personal investment capacity, investors must analyse the stock market scenario to frame an appropriate investment strategy. Individuals must identify stocks that suit their needs. For example, if an investor wants an additional source of income, investing in dividend paying stocks is appropriate. For investors who want to grow their capital, choosing growth stocks is an accurate strategy.

Enter at the Right Time:

Entering the market at the right time is one of the most important share market basics often overlooked by investors. The general rule of thumb suggests that one must enter the market when it is low. 

Purchasing the identified stocks at the lowest price level will maximise the potential profits investors can earn. On the other hand, exiting the stock when it is trading at the highest price is profitable.  

Planning the right entry and exit is the fundamental of share market investment. Without a strong plan in place, you will be like a ship without a compass in the sea. Since the stock market is highly risky, you need to exercise caution beforehand to avoid a disaster. 

Planning entry is based on fundamental and technical analysis. There is no right or wrong which analysis method you select but be careful of what you infer from the result. While selecting a stock, you mustn’t only concentrate on individual stock performance, instead look for cues from general economic performance and macro-economic factors, which might impact share performance. As a rule of thumb, invest in the direction of the trend.

Most successful investors follow four data points, which are P/E ratio, P/B ratio, and Dividend Yield of NIFTY, and FII activity to identify the right entry point.     

Execute the Trade:

Traders can execute their orders either through offline or online share trading. They can place their orders on the telephone. If an investor chooses the offline method, he must ensure the broker has understood the order correctly to prevent any errors.

Monitor the Portfolio:

Many investors make the mistake of investing and not periodically checking their investment portfolio. The stock exchange is dynamic and conditions are constantly changing. Tracking your investments regularly is important to exit and entry at the right time. Researching about the companies where traders have an interest is crucial to prevent, or at least minimize, losses in case of any extreme situation. However, this does not mean making decisions with every price rise or fall because patience is a vital characteristic for traders to profit through stock investing.