Investing in the stock market could be risky for anyone, especially for the common people who don't have much idea about the stock market. But if you are looking to start investing in the stock market you don't need only some knowledge but also there are certain rules that need to be followed while investing. Today we are going talk about the points to consider while buying stocks for long term.
The decision to invest in the stock market is influenced by many factors; you can't pick any stock from the market and invest any time as per your ease. There are various things that should be considered to make your investment decision not only profitable but also safe and protected from unexpected market moves. So, let’s talk about things to consider before investing in stock market.
10 Points to Remember While Investing in Stock Market:
#1 Start with a Small Amount at the Initial Stage
Even though you have a sufficient amount of money in your bank account and you have just started investing in the stock market, then start with the smaller amount. With the time being, as much as you start understanding the market, put your surplus money in the market.
Investing a smaller amount at the initial stage will put your investment at lower risk, as if the stock price goes down it would be not devastating for you. With such a smaller amount you can keep the strategy of regular investing, which will make your portfolio larger at some point in time.
#2 Keep Regularly Invest in the Stocks
This is one of the very important points to consider before buying stocks. Never buy in larger amount at a time and wait to grow your investment. Keep the strategy of investing in the stock market on a regular basis. Yes, if you are a salaried income person, you can monthly keep investing not every month but whenever you have the money and there is a buying opportunity in the market you can invest.
Investing regularly doesn't mean, buying any stock trading at a high valuation, you should wait and watch such stock to come down and buy on dips. However, regularly investing in the stock is like you are investing in the SIP that will accumulate your investment and create a bigger portfolio.
#3 Invest with Buy on Dips Strategy
As I suggested you never buy stocks running at higher valuation or avoid buying shares when the market is high. You should keep the buy-on-dips strategy that will give you an opportunity to purchase the stocks at lower points with a high potential of giving returns even for the long term.
To execute this investing strategy successfully, you have to keep an eye on the stock you are looking to buy. You can add such stocks to your watch list in your broker's trading app and also create the alert at which point you intend to buy the stock. And when the stock reaches such levels, you can put the buy order and grab the stock at a much better valuation to get better returns.
#4 Find the Stock for Long-term Investment
Such stocks are meant for trading in the stock market, as they are highly volatile in the market and overreact when the market moves. You should avoid buying such stocks, and focus on the stocks with the perspective of long-term investment. And find such stocks you should pick the companies that are fundamentally strong, growing gradually but consistently and also giving dividends regularly.
Finding such stocks is difficult, as you can choose from the blue-chip companies or the industry leaders having the biggest market share in the sector that have strong fundamentals. Such companies are the best option for long-term investment and can give you lucrative returns.
#5 Diversify your Investment in Different Sectors
Putting all your eggs into one basket has the risk of breaking all of them if they fall or get damaged. Similarly, investing all your money into a single stock or only a few sectors is exposed to the various types of risks. As, if any negative news or unfavourable economic activity is visible in that sector or industry, your entire investment in that particular sector will be adversely affected.
Invest in the stocks from different sectors, so that there should be a balance of growth in investment. The benefit of doing so is if one sector falls down, and other sectors keep moving your portfolio will be not affected that much and you will have a well-adjusted portfolio to absorb the unexpected moves in the market. Always choose the key sectors that are driving the economy.
#6 Don’t Invest Money Borrowed or Kept for Emergencies
Never take any loan or use the borrowed money to invest in the stock market, it can cost you more than the interest you are paying on such advances. Investing borrowed money not only makes your life stressful but also increases your liability, as it could take a long time to get lucrative returns. And when you have to pay off such debts selling your investment is not another option left with you.
In the stock market use the surplus money, or the amount you have parked into your savings account and don't need in the near future. Though, investments in stocks can be liquidated within a few days, but it is not necessary at that time or in such needs your investment is profitable. Hence, it is advisable to invest the money you have in surplus or doesn't need to be used for any urgency.
#7 Invest Your Money in Fundamentally Strong Companies
This is one of the very important point need to consider while buying shares. Always invest your money in the shares of the companies that are fundamentally strong. Yes, for long-term investment you need to analyse the fundamentals of the company. It will help you know the performance of the company, its operating margins and profitability or future growth plan and strategies of the company.
Also Read: Why is Fundamental Analysis Important for Investing in Stocks
A fundamentally strong company operates consistently with steady revenue and earnings growth, and with the income growth of the company, the share price of the company also grows. It will also help you to compare the best companies in the sectors and when you find the intrinsic value of the company you can compare the stock of which company is available at a lower valuation.
#8 Keep Your Self Updated with News and Key Data
Investing and forgetting is not the right practice while investing in the stock market. You should keep yourself updated with various news and key economic data or various other factors that can affect the stock market and price of the individual stocks. Keep reading the financial news, use the top stock market applications and keep tracking the GPD numbers, IIP, Interest Rates, Monterey Policy and other key data that can affect the stock market movement.
These numbers will help you make the right decision while investing in the stock market. When there are positive sentiments or encouraging dates, you can also make your strategy to invest in the growing sectors. Apart from that also keep reading about the stock market technical like fundamentals of investing, technical analysis and regulatory actions taken by the SEBI etc.
Also Read: Technical Analysis vs Fundamental Analysis: Which is Better
#9 Don’t Believe in Unsolicited Tips & Recommendations
In the stock market, you will get promotional ads, sponsored commercials, videos and recommendations from various known and unknown market pundits. But everyone is not reliable and some of them could be fake or untrustworthy. They can encourage you to buy specific stocks, join their social media channels like WhatsApp or Telegram and might ask for subscription fees.
But don't believe in everyone, and don't trust on such unauthenticated tips or recommendations. Always, join a registered broking company or well-known news channels or websites to get useful and reliable tips and recommendations from experienced and certified market experts. And when you open your trading and demat account with your broker you can get such tips freely.
#10 Get Help from the Market Experts & Professionals
The best way to invest in the stock market wisely is to get help from market experts who have better knowledge and experience in the stock market. These market experts are like certified financial analysts, fundamental analysts and technical analysts who have access to paid tools and software to analyse the market conditions or fundamentals of the individual stocks to recommend the best one.
And to get help from such market exerts you need to become a customer of a registered broking company that can provide you a well-organised investing platform with proper guidance to invest in various financial instruments. As registered members of the stock market, you will get reliable and authenticated tips and recommendations from market experts backed with research reports.
Wrapping-up
These are the few important things to consider before investing in stock market to make your investment decision not only profitable but also safe and secure from unexpected movements in the market. Though you should not make all these a thumb rule, following them will help you make the right and sensible investment decisions, which is very important in the stock market.
Apart from these golden rules, you also need the right investment platform to make your investment decisions executable without any hassle. Hence, choose the right discount broker in India that offers the best online trading apps to invest in stocks or trade in commodities and the forex market.
Moneysukh is a full-fledged broking company also offering discount broking services to invest in equities, commodities and currencies. It not only provides the most advanced trading platform but also offers a one-stop solution for investing through multiple instruments like equity, ETFs, and mutual funds. And you can also trade with advanced algorithms for high-frequency trading.
Also Read: Discount Broker vs Full Service Broker: Difference & Which is Best?
Moreover, investing with such highly professional broking companies not only becomes hassle-free but you will also get tips and recommendations from the market experts to invest in the best companies and make your investment a profitable journey. Hence, also make a wise decision while choosing the right broker and investing partner to get the best services at reasonable charges.
Also Read: Golden Rules for Trading in Stock Market: Top 10 Basic Rules
