Investing in the stock market is not that hard. What’s hard is choosing companies that consistently beat the stock market by giving good returns. That’s what most beginner investors find difficult and the whole stock market investing seems like an uphill battle to them.
One thing to note here is there is no shortcut to success in stock market investing; Although no formula has been discovered to succeed at stock market investing, one should always keep learning. Beginners should seek the best investment tips before investing. In this article, we have curated some of the basic yet powerful tips for stock market investing that will definitely help in laying the foundation for you in the long run.
Stock market tips and tricks for Beginners
Don’t let emotions drive your decisions
It’s often seen those beginner investors let their heads, not their guts, drive the investing decisions for them. While investing, one should always keep in mind the trading decisions triggered by emotions is one of the most common ways investors cause damage to their own portfolio returns.
Don’t follow the herd mentality
Usually, it’s seen that first-time investors’ decision is heavily influenced by the advice of his acquaintances, family or relatives. If everybody around them is investing in a particular stock, the tendency for novice investors is to do the same. This strategy is dicey in nature and can take a toll on them later. If you want you can take necessary investing tips for beginners from any experienced investor that can be your family or friend; but again, just take some tips, don’t follow them blindly.
Not to mention, you should always avoid having the herd mentality if you don’t want to lose your hard-earned money in the stock market. Even the world’s greatest investor Warren Buffett has said, “Be fearful when others are greedy, and be greedy when others are fearful!”
Always research before investing
Thorough research of the stock you are thinking to invest in should always be undertaken before investing in stocks. But unfortunately, that is not done more often. Investors tend to get influenced by the name of a company or the sector they belong to. This is, however, not considered as the right way of putting one’s money into the stock market.
Invest in the sector you understand
We all have a hidden inclination towards some of the sectors; many realize it sooner and many investors don’t realize what it feels to research and invest in their favourite sector. In a nutshell, the crux of the statement is – invest in a stock which belongs to one of your favourite industries. Many of us can be inclined towards different industries – be it IT, automobile, banking, pharma, FMCG; you got to pick which one you will be comfortable investing with and then keep researching about the latest updates. In this way, investing will become an interesting part of your life and you will enjoy the share market investment process rather than considering it as an intricate task.
Set Long-Term Goals
The question to ask yourself before you even start investing in the stock market is “why are you considering investing in the stock market?” Do you need the returns back in six months, a year, five years or maybe longer? Does your investment objective entail retirement planning, for future college expenses, to get a new home, or to buy your dream car?
Before investing, you should know what is your purpose of investing and when you can hold the funds by not using them. If you are likely to need your investment returned within a few years, you should try reconsidering your thoughts; the stock market has always been highly volatile which provides minimum certainty that all of your capital will be available when you need it.
Diversification is necessary
Diversification of portfolio across different asset classes and instruments plays a major role in earning substantial returns on investments with minimum risk. The kind of diversification may vary as it depends on the investor’s risk-taking capacity. If you are using an online platform like Groww to invest in the stock market, it becomes even easier for you to choose between different stocks as all of them and their details are available at your fingertips.
Set realistic expectations
There is a very popular myth that stock market investing can make you rich very quickly. Never go with such an assumption; there’s nothing wrong with hoping for the ‘best’ out of your investments, but you could land in trouble if your financial goals are based on unrealistic assumptions. For instance, a plethora of stocks has provided more than 50 per cent returns during the great bull run of recent years.
However, it also doesn’t mean that you should always expect the same kind of return from the stock markets.
Invest only your surplus funds
One of the golden share market tips for beginners is to only invest your surplus money in the stock market after fulfilling all the basic expenses. If you are willing to take a risk in a volatile market like this, you should check before whether you have surplus funds which you can afford to lose and which will not intervene with your set budget. However, it is not necessary that you will always lose money in the present scenario, but no one can be sure about it. That is the reason why you will have to take risk only with surplus funds.
Always keep yourself updated
Last but not the least, if you want to become an active investor, you need to keep yourself updated every time about the market news. You can either watch finance news, read blogs and articles related to the financial landscape or be in a circle where everybody has something new to discuss the market. This not only helps you to be aware of the happenings in the market but also helps you in monitoring your invested funds.
On a closing note
In this article, we have tried to enlist some of the basic yet essential investing tips for beginners that can make wonders happen, if followed regularly. If you are also thinking about the right time to invest, it is now. You can start with a little money and get the real-time experience of the market. But make sure that it does not affect your set budget.