It is human nature to constantly look for ways to earn that extra cash either by some kind of miracle or by depending upon luck. However, if the aim to earn money positively is strong enough, one would not opt to depend solely on luck or chance.
Only extremely imprudent or desperate people opt to depend on sheer luck for earning money. The others trust their timing, intuition and the wonder in the investing world called compounding interest.
The key to being a great investor is to avoid any kind of financial risk as much as possible, keep investing regularly and then finally, to set long term goals for those investments.
However, this job cannot be done by a single person all by himself. Expert assistance is always required. There are few good investment management firms like Rise Asset Management Private Limited you can look up for expert assistance from.
Co-founded professionals like M. Mohan Krishna and G. Surya Prakash Rao, this firm has been helping individuals invest in stock market for quite a few years now. What makes them stand out from the competitor is that they use technologies like artificial intelligence and machine learning to manage portfolios.
In this article they have shared top 5 stock market investing tips for beginners:
- Plan ahead in cases of risk- The unstable nature of the stock market can be highly risky and this may cause you a lot of anxiety. There is a need for you to understand the level of your risk tolerance and your willingness to go forward with the risk.
During such times of financial uncertainty, you must keep calm and then take a wise decision after proper analysis. This requires good planning so that you stay prepared for such kind of situations. Sometimes decisions taken at the heat of the moment can cause you to buy stock at a high price and sell at a low price which could have been avoided easily.
It would be helpful to maintain a journal where you can mention the reason why you are investing in that particular stock and the reasons because of which you will be ready to sell off that stock. In times of panic, this journal will help you reflect on your decision so that you do not become hasty.
- Keep your investments diverse- It is never advisable to keep all your eggs in one basket. The only way that you can manage risk is to invest in diverse companies, diverse sectors and diverse industries so that even if one stock does badly as a result of some event, your other investments will remain secure.
In the initial years of investing, it is advisable that you do not take in extra risks. Keeping your investments diverse will also help you make up your losses in cases where one stock brings in losses.
- Set long term goals- The stock market is a highly volatile market. One of the key essentials that you need to keep in mind before investing in the stock market is to evaluate the purpose of your investments.
Whether it be for retirement or college purposes or anything, your purpose will help you determine the term for which you wish to invest in a particular stock. Your long-term goals must be determined so that you can agree on the amount that you wish to invest.
Your returns will increase depending on the amount you invest, the net earnings on that amount and the period up to which you keep your investment in that particular company.
- Invest only your additional funds- The amount you are planning to invest in the stock market should be the funds that affect your day-to-day lives or the funds that you might need in cases of emergency. Especially if you are a beginner, you should avoid being enticed by the shimmery of the stock market once you start getting returns.
In the initial stages, it is important that you learn how to invest and understand the behaviour of the stock market. Also, you must keep aside a certain amount of fund in cases of emergency so that you do not face financial crunches in times of need. The amount that you invest must always be the extra cash that is lying around.
- Choose your company wisely- It is essential that you keep in mind that investing in a company’s stock makes you a part owner of the company. Therefore, you should choose companies that are completely trustworthy and are well-managed.
Proper research about the company, its competitors, its long-term goals, etc. is necessary so that you can rely on that company. Strong companies offer better returns and you can depend on them to survive the heavy fluctuations of the stock market. Low priced stocks may not always be profitable and may contain high risks.