You have your hard earned money and you have the thought of growing your money. You are getting suggestions from many people about stocks, bonds, shares and all the ample options that you have in the market. But you are confused and scared.
Welcome to the world of investment, where you are like many hundreds out here. The investment market is very huge and the right set of instructions and helpful guidelines can take you a long way. I am talking about investing your money in stock market in this article.
- Understand before you invest and do not time the market: Buying the right stock is the key to yield good returns. But the question that arises in your mind is ‘how to buy right’? You are in the buying business, so you need to perform the stock analysis. I am not talking about the market analysis here. Even investment pros like Warren Buffet suggest that you value business and understand the stock before buying it, instead of analyzing the market and timing it. Zero down on companies that have good growth potential. You will not make money in a matter of a day or week, you need to invest right and wait for the company to grow along with your surplus funds.
- Herd mentality: There is a usual mistake done by most investors. First time investors make a fault of investing in stocks based on the popularity of the stock and not the growth potential. Do not follow the herd mentality during investment. Your reason to buy a stock should be based on the companies widening motto and business values, a very rational decision based on the available facts. Having a herd mentality during investment leads to heavy loses. This is the key reason for stock market bubbles and crashes. It is but natural for anybody to feel that a large group cannot go wrong, and that is the key reason to invest while following the herd. An example for this is the Dotcom Herd bubble to burst in the late 1990s. Keep your emotions at check and do not go into emotional financing either. Always invest based on rational thoughts and facts.
- Be realistic: The next key step is “sit tight”’. Though this seems extremely easy, it’s one of the toughest jobs. Yes! You need to have patience and wait for your investment to yield right returns. Set realistic targets and wait to yield results. As a first time investor, chances are you would want to sell off your stocks quite early. But remember that day-trading is not as easy money making as it sounds and it takes away a good portion of your time.
- Follow a disciplined approach: Discipline is another important aspect for investment. Discipline yourself not just to buy the right stocks and wait, but also to make sure that you diversify your stocks and portfolio to keep risks at edge. Keep in mind that the targets you set for your return on investments should be good enough to beat the significant inflation that you see, year on year.
- Monitor regularly: Monitor your stocks. Experts suggest that you look at your stocks once every two weeks. Develop a temperament to re-look and reevaluate. There is no need to pay attention to intraday price movements but you need to keep an eye on the change in profit projections for the year and the next, and the company’s performance with respect to its peers.All said: “Buying and selling is a wonderful game, just remember that you don’t play it too often” as quoted by Warren Buffet.