Who says that man needs money only to satisfy his basic needs? It is hard to come across a person not interested in leading a luxurious life. Every man wants to earn enough money to avert a second thought while buying any product. Money makes money. Someone once said, “it’s better to cry inside a BMW or Audi R8, rather than weeping inside an auto-rickshaw.” To become so much rich, one has to invest a part of his savings. Anybody can become an investor, but only few people can move ahead from the level of a Green horn investor. In order to become a member of the profit-earning investors’ elite group, at least some of the following investment strategies should be one’s sacrosanct.
10. Debt or Equity:
Without goals, a strategy is like a boat without a rudder. What’s the benefit of steering in a direction one has no idea of? Actually, one should have to decide whether he wants to take risks or not. If a person is willing to take a risk, then he should choose Equity Market as his area of investment. If not, then Debt Market is always there for a warm welcome. The general rule is to invest in a a mix of bonds and stocks.
9. Invest Through Fundamental and Technical Analysis:
Today, it’s easy to learn how to choose your investment strategies without a loss of even a single penny. Thanks to various real-time software, which through Virtual Trading help people to get an idea about the technical jargons and practical implications associated with investment strategies. Do some homework by reading books and journals on Financial instruments and Stock Market.
8. Current Market Analysis Pays:
In the stock market, nothing is firm or fixed. Until and unless you are a good Fundamental Analyst, stay away from trusting the deceptive past figures. Never rely completely on the past data, analysis or reports on any stock or bond because what is happening currently has no relation with what happened in the past. Update yourself by reading daily news for an information dose on the related topics.
7. Diversification Investment Strategy:
It’s a general rule of Investments and portfolio Analysis that in order to get more profits from the stock market operations, one should diversify the portfolio. Some stocks are of High Beta and others are in Low Beta. Some are directly proportional to the indices; others are inversely proportional to indices. Check the trends of various stocks and bonds in order to concoct the portfolio wisely. If you diversify your investments, then the aggregate impact of any plunge in the market will not be high.
6. Portfolio Management:
Set a discipline and adhere to it. Trade in various stocks, but do not fill your portfolio with more than 15 to 18 stocks. If you still need funds, then check which stock shall be replaced with the new one.
5. Long-Term Holding:
Don’t expect any kind of the windfall gain ever from a stock market. Try to use “Let the other person earn” strategy. Hold on to your existing holdings and don’t hold a short position (Selling of the securities that are not owned and repurchasing them at a lower rate) until and unless you are a proficient trader because if you aren’t able to honour payments, you’ll be doomed.
4. Track Long and Short-Term Market Trends:
The market works on the basis of sentiments. Then comes “fundamentals of the companies”. Be vigilant of daily trends and act accordingly. Don’t sit back and relax because it’s your hard-earned money that is circulating out there. If possible and if you’re knowledgeable, go for intra-day transactions. Though, they are risky, but the commission charged on them is ten times lesser than that on the Delivery transactions.
3. Contingency Investment Plans:
No matter where you invest and how much amount you invest, the interest rate of earnings should be more than the rate of inflation in the market. Moreover, be ready with some contingency plan that can be easily implemented in case of any adversaries. And above all, save a proportion of earnings for any unforeseen hitches.
2. Use Consultative Buy-Sell Approach:
Consult the Blue ribbons of this arena and then buy/sell the securities. Do not get impulsive in buying or selling the securities. Warren Buffett once said, “If you buy things you don’t need, soon you’ll sell things you need”.
1. Track Transactions:
“Risk comes from not knowing what you’re doing”. This quote by Warren Buffett hits the bull’s eye of the stock market formula. First of all, stock market or mutual fund market is meant for the purpose of investing, not gambling. Ergo, don’t become a victim of cupidity and don’t try to plant trees during autumn. Rather, keep a record of every transaction for ready reference in case you’d like to keep track of where you went wrong.