You can invest your hard-earned money in several ways and earn returns from it. If you choose the stock market to be one of those, then you need to unlearn a lot of things and learn some new concepts.
Stock market investing is not that easy. Whether it is investing or it is trading that you are doing, you need a lot of patience and conviction to take a position in the stock market. Volatility in the stock market makes a lot of people apprehensive of investing in it. Because of the uncertainty in the equities market, people tend to park their funds in less volatile markets.
In this write-up, I will tell you my personal experience with the stock market and also why most retail traders fail in making money in the stock market.
First, there is no denying that there is no limit on return generation that this field has. There are unlimited earning opportunities that you can dig out of the financial markets. However, one should be well versed with all the financial concepts. Budding investors and traders should spend time learning and understanding financial concepts. The core of financial markets should be known to beginners. Beginners need to understand how to open a trading account to be able to trade in the market. With the advancement in technology, opening a trading account and Demat account has become a piece of cake.
My first piece of investment was into mutual funds via SIP. As everyone told me, it is one of the safest ways to make an entry into the financial markets. With that investment, I started tracking the equity market regularly. I was amused to see the volatility in the equity market. When compared to the NAV of the mutual fund, the equity stock prices moved faster. I started comparing the return generation, and finally, after saving out of my salary I made my first equity investment. This is how my investment journey began and below are some points that the stock market taught me.
Learnings From Stock Market
- Do your due diligence. No stock market professional can time the market and the stock price movement. It is important for a beginner to fundamentally analyze the company and check the financial health of the company before making any investment.
- The stock price movement is defined by the past structure. However, it is not the sole parameter to analyze the movement. Current market situations might be different and it is not necessary that the price will move in the same way. Beginners should not invest solely in this perspective. They should study industry demographics along with market sentiments.
- Traders should always look for stocks with high volatility. It is better to select stocks that are part of Nifty and Sensex. Stocks under Nifty and Sensex have high volatility.
- One more thing beginners should focus on is the institutional investor’s interest. Try to catch institutional investors’ waves to generate high returns.
- Beginners should know that equity market investing is always focused on the future aspect. Beginners need to find out companies that have enough potential to increase the demand for their products and outperform the market index. For instance, Electric Vehicle Car/battery makers.
- For long-term investing investors should prefer companies that offer high dividend rates and high growth modules.
- Respect the price action more than anything else. Do not stay invested because you love the company’s product. Always be mentally prepared to take an exit from the company.
People doing online trading and investment should always prefer stocks with good fundamentals. Even if you are a trader, look for fundamentally strong companies and do not risk your capital because sometimes you might have to hold your position for the long term.