Tips for Share Market Investment

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“Investing is laying out money now to get more money back in the future”, while a lot of people work accordingly and invest their money in different assets, there is still a lag when it is about share market investment. With the right share market investment tips and the knowledge of how the stock market works you can be able to make better returns than the other investment options.

The share market has grown over the years and the potential gains generated have attracted the millennials as well.

It is never too late to start investing. So, if you are looking for share market tips for investment, then you have reached the right place.

So, let’s begin!

A lot of people still invest in fixed deposits considering the safety. But what they fail to recognize is that the potential returns are not very much. If done with patience and the right strategies, share market investments can reap great returns.

So, if you are also wondering, how to start stock market investment, or how to pick stocks for long term then here are some best tips for share market investment.

Understand the Basics of Stock Market Tips

What do you do before taking a test? You read, learn, and strengthen your concepts so that you score the best. Similar is the case with share market investments as well.

People often shy away from the share market thinking that it is very complicated and risky. But when you understand the basics of the share market through and thorough, it is really interesting and profitable.

At the same time, “A little knowledge is a dangerous thing”, therefore it is important that you don’t trade based on someone else’s experience.

Most of the time, investors face losses in the initial period of their investment in the share market and thus quit even without gaining its complete understanding.

It is therefore important to educate yourself, do proper research and also keep an eye on everyday news of the stock market to gain the desired knowledge of the market.

If you are a beginner investor and looking for some of the best tips to increase the chances of success, then here are some of them that guide you in planning your investment in the share market.

Know Your Goals

As we discussed above that just as you study before taking a test, it is also important that you study the stock market as well. So, another thing that you do while preparing for a test is to set your goals.

You often think about the pass percentage, the number of hours that you want to dedicate to each topic, and so on. Just like it becomes easier to score well with defined goals, it becomes easier in the share market as well to earn profits when you have a fixed goal.

Now the most important question is, why are you thinking of investing in the share market? What are your financial goals? Answering these questions will also help you to decide your trading style.

If you are looking for long-term goals like buying a car after two years or are saving up for your higher education, then you will be an investor and look for stocks accordingly. In such cases, people often look for the stock that has stable growth and higher chances of generating profit over the years.

For this reason, most of the investors rely on blue-chip stocks like Infosys, TCS, etc. for such investments.

But do you think investing in such stocks is a good way to generate wealth in a long term?

Well, it can be but not always.

On the other hand, if you have some short-term goals like buying a house in the next year or admission to the top university in the next session, then relying on large-cap stocks cannot provide you with many benefits.

For this, it is better to look for the stocks that have high volatility and comes up with short-term gains.

To make a better choice for such stocks, stay updated with the news, do technical analysis, etc.

Also, to make it easier you can rely on the small-cap stocks listed in the index. Although they come with higher risk but at the same time provide you with an opportunity of gaining higher returns.

So, once you have chosen the reason for you entering the stock market, you will get a clearer idea of the strategies as well.

Do Proper Research

Now before taking a test you obviously study hard, but more importantly you research for your study material. It totally depends on what are you reading and where are you reading from.

Nothing is more important than good research and it is prominent in the stock market as well. You should not only be aware of the recent happenings of the market but also the right kind of stocks to pick.

If you are an intraday trader, you need to technically analyze the stocks, understand the trends, and then trade accordingly.

If you are looking for long-term goals then you should be aware of the fundamentals of the company.

Right research will help you pick the stocks with good potential and also the right time to enter and exit. Not only this but it will also enhance your knowledge regarding the stock market.

Know Your Risk Appetite

Just like you set your goals, you should also specify the maximum loss that you are willing to take on your trades. After all, nobody wants to lose more than they have gained.

Every person invests in different quantities of capital and has a different potential for risks. Since the market has good volatility, it is important to define your risks as well. Now since it is a very subjective factor, it can depend on age, financial income, savings, expenses, goals, and various other factors.

If someone is looking for long-term goals and has less risk-taking abilities, then that person should preferably look for stocks that have stable growth and lesser fluctuations.

Diversification is the key to building a successful portfolio. Try to invest your capital in different companies and sectors.

If you invest all your money in a single option, there are chances that you will have to face significant losses. Your portfolio should be diversified in such a way that even if you face losses in one, then you have the option to recover it from different sources.

Now let us understand this clearly with the help of an example. Now the automobile sector is considered to be a growing sector. But when the pandemic started in March 2020, there was a decline in the performance of this sector. Whereas on the other hand, the pharma sector showed great progress, despite its slow growth in the past 4-5 years.

So, somebody who invested all the capital in the automobile sector thinking that it will give a certain amount of returns might have faced losses. On the other hand, someone who invested both in automobile and pharma might have recovered the losses faced in one through the growth of another sector.

It is therefore important not to put all the eggs in one basket, and diversify your portfolio.

Control Your Emotions

Mixing emotions with your trading journey can put you in trouble. It is important for you to control your emotions when you are trading in the stock market. Your decision-making should be solely based on facts instead of emotions.

Sometimes the investors also get emotionally attached to their stocks and no matter how off it might sound, but it is true. A lot of people consider the IT sector as a safe bet for their investment and it is not wrong as over time it has shown great growth.

But looking back at the time of the 2008 recession, the IT sector was severely affected. A lot of people who were emotionally attached to the stocks suffered a lot of losses.

So, it is important to weigh your decisions based on factual knowledge and not just emotions.

Apart from this, a lot of people start trading based on the advice of their near and dear ones and often complain about incurring losses. Something that has worked for your friend is not necessarily going to work for you as well. The goals can be different, the capital investment can be different, and even the entry point.

It is therefore important not to make decisions based on your trust in someone.

Also make a strategy, practice, and then stick to it. It is very common for beginner traders to panic when they see even a slight inconvenience. It is very important to stay calm, study the situation, and then act accordingly.

If you are following the tips for share market investments, it gives you a higher chance of generating profits.

Depending on different financial goals, there can be different tips for the investors. Let us have a look at the same.

A lot of investors are usually looking to fulfill their long-term financial goals. It is important to remember that planning for long-term investments needs patience and the right strategies. Let us look at some of the tips for long-term investment in the share market.

Fundamental Analysis of Stocks

When you are looking for long-term investments in the share market, it is important to go analyze the company fundamentally. But what is fundamental analysis of stocks?

Imagine you have to promote one of the employees in your company. You will definitely not take this decision randomly. Rather you will go through the track records, the performance, and the growth potential that the person has shown. Based on your evaluation, you will reach the decision of whether to promote or not.

Similarly, when you are investing your hard-earned money in the share market, it becomes important that you first find the “fair value” of the company.

In fundamental analysis, you study the past records of the company that includes, its past performance, its performance in comparison to its peers, the debt to equity ratio, and much more.

Read the company’s background and see whether the goals of the company are aligning with your financial goals or not. Also, look for the companies that have a good growth potential in the future as well.

If a company has less debt to equity ratio, has been performing well in the past few years, etc., it is said to be fundamentally strong. The blue-chip stocks are considered fundamentally strong and apt for long-term investments.

Pick The Right Stocks

This is one of the most vital steps in generating profits in the share market. You need to first understand that you need to focus on the stocks that are capable of generating good returns and not mere volatility.

You can go for the blue-chip stocks, these are the companies that are fundamentally stable and are capable of generating better returns. It is also important that you stay away from penny stocks.

These are volatile for a certain period and there are lesser chances for you to reap benefits in long term.

Stay Away From Hot Tips

It is very important as a long-term trader that you pay less attention to the hot tips that guarantee good returns in a short time. Avoid getting lured by price fluctuations and volatility.

The small profits generated within a day or so are not what you are aiming for in a long-term investment. Understand the power of compounding and stay invested.

Now sometimes there are certain news or rumors that drive the market very rapidly. While this news can help you if they are factual, it can also distract you from your gains if not true.

Let us take the example of the Adani stocks. Back in June 2021, news circulated in the market regarding the banning of some FPI account owning shares in the Adani group. This news created a buzz in the market and the prices of almost all the Adani Group stocks went down south.

A few days later, that news was discarded and was declared old and false. So, the traders who were invested in the stocks suffered huge losses because of the panic selling that happened because of the news.

It is therefore important that one should stay clear from the hot tips or rumors. Hot tips also include the market manipulators who also in turn cause the market to move on their own signs but for a shorter duration.

Moreover, pick your own strategy and then work accordingly. Another important thing is not to check the market every day. It will distract you from your long-term goals.

Patience is the key to long-term investments. If you preach and practice the same, you will reap the benefits.

Just like your long-term investment goals, there can be short-term investment opportunities and goals as well. Now that we have looked at the tips for long-term investment in the share market, let us also have a look at the short-term investment tips so that you can make the best out of the opportunity.

Technical Analysis of Stocks

Research is important in all kinds of investment. But the difference between the research for long and short-term investments is the line between the fundamental and technical analysis.

Now, what is technical analysis? Technical analysis is studying the market trends, the volume, economic details, of the stock to determine future performances.

In all it is the base and primary step to select stocks for intraday trading.

Suppose you have to go on a trekking trip, then it is important for you to check the weather conditions there so that you pack the suitable clothing accordingly. It will become easier for you to read the forecast of 2-3 days and then decide based on that.

Similarly, when a trader is looking just for short-term goals, he/she can read the current market happenings around that stock and see the recent data to determine future performance.

Now the intraday traders or the traders looking for short-term gains, it is important for them to understand the market trends. Technical analysis helps a trader not only to choose the right stock but also to decide the right entry and exit price.

You can make use of a lot of indicators and chart patterns to determine the right stock for yourself.

Right Time

Not only the right weather, but you also have to choose the right time to trek so that you make it on time and enjoy the experience. Similarly, when you are trading, it is important that you know the right time to enter and exit so that the losses are negligible.

Intraday trading has a very small trading window. Deciding on the right intraday trading time is very important. Since in short-term investing, the market is driven by volatility, it is considered beneficial to trade in the early sessions as the market is in full swing at that time.

Not just entering at the right time but also exit when your goals are met. Don’t keep hanging out of greed to earn more or in a hope that your returns will double. You never know when the situation might turn against the gain.

Set a Target and Know Your Risk

Now if you are trekking and then thinking of setting a camp later, you should have a detailed knowledge of your destination and what are the surroundings like to guard yourself against any potential danger.

If you are thinking of investing in the share market, understand that setting targets is the very important thing. It is only when you set a target that you will be able to hit the bull’s eye.

Always set a target so that you don’t get carried away by the pool of greed. It is a common human tendency of wanting more and never have enough, but you have to keep a special check on it.

As you will be choosing highly volatile stocks, it is important to use a stop loss. Here know the important factors to set stop loss for intraday trading to minimize your losses.

In such volatile conditions the market can go south within the blink of an eye, so always make sure that you have capped your losses.

These are the few things that you can keep in mind when you are looking for investment opportunities in the share market.

Conclusion

How to earn money from stock market? , if this is the question that keeps running in your mind as well, then the answer is simple, be disciplined and strategize. No doubt share market risks sometimes scare you but if you keep the tips for share market investment in your mind, you can easily make money and also enjoy the process.

You can invest for long-term and short-term depending on your financial goals and needs. If you are willing to start investing in the stock market, open your demat account today!