The stock market is a great place for making money so lots of people believe that investing in shares is like money making machine which can turn them into millionaire over a period of time. Well, it is true that lots of investors made good profit through investment in share market. But it doesn’t mean that every investor make profit. Many experts say that money making in equities is not easy task. But, I believe and think in contrary direction. I believe that everybody can make profit and not only profit but may be huge profit over a period of time.
Why majority of people do not make profit from share market? This is because many investors invest their money without proper knowledge about share market and as a result they lost their hard earned money in share market. It is also true that due to volatility nature of share market in last few years has left investors in state of confusion. They never make mind whether to invest, hold or sell in such a scenario.
Although many experts believe that there was not sure shot formula for make profit in share market. But I believe that with the help of some basic knowledge about share market and after taking some important factors consider everybody can make profit. Today I am going to discuss some golden rules of share market which, if followed prudently, increase your chances of getting a good return.
Golden Rules for Investing in Share Market:-
- Information about share market
Before start investing, every investor should know what share market is and how it is work. I believe many investors already know about this. Share market is a market where shares are bought and sold. Besides shares, other instruments like bonds, mutual funds and derivative contracts also traded in the share market.
There are two types of share market:-
Primary Share Market – Companies enter into primary market to raise funds. It is in the primary market that a company gets registered to issue shares to the public and raise money. In case a company is selling shares for the first time, it is called an Initial Public Offering or IPO.
Secondary Share Market – In this type of market investors trade already listed shares by buying and selling them. Normally in a share market one investor buy shares form other investor at prevailing market prices through broker.
- Avoid Expert Opinion about Shares
Typically investor decision is heavily influence by action of experts, neighbours or relatives. He usually invest in that particular stock after hear opinion from other people. Without using his judgement or mind about that stock he lose his hard earned money in share market.
I suggest never influence by action of such experts. I personally believe that these experts has only moto of their profit and not yours profit. Always apply mind before investment in share market.
- Study before buy Shares of any company
Majority of investors who lose their hard earned money in share market never think about in which company they going to invest. Investors generally go by the name of a company or the industry they belong to. This is however not the right way. They buy stocks without consider which type of company it is and what are their past performances.
I suggest always take consider the stock company and its past performances before investing in share market. Proper knowledge about Share Company will reduce risk of losing money in minimal state.
- Invest in Stocks you understand
Basic fundamental rule of share market is that always invest in stocks which you can understand or I can say that before investing in a company, you should know what type of business the company is in. Now the question arise WHICH STOCK or SHARE SHOULD I BUY? Most of the investors never think this before investing in share market.
I suggest always invest in that company which influence on share market. I mean to say that invest only in big companies. Because investing in such companies will always reduce risk of losing money
- Timing of Investment in Share Market
From my point of view this is also basic fundamental rule of share market. Most of the investor loss money not because they invest in right share but in wrong time. Many of the investors buy share when they already trade at their 52 week high price. I think this is biggest mistake by small investor. For example from below mentioned screen shot of Vedanta Limited, you can easily see that this particular share already trade at his 52 week high price and also give around 90% return in last 365 days and around 11 % of return in last 30 days.
(Data taken from nseindia.com on dated 08.09.2017)
I suggest that this share is already at its peak and give maximum return in last 1 year. So investor will invest by seeing its 1 year return without consider others factors properly and as a result loose his hard earned money. I am not saying this is not a good share or good company (Here I am not try to promote or demote any individual share of company). I am just trying to say that always try to invest in that company which is currently traded at its 52 week low or around that so that there will be high potential for making huge profit.
- Create portfolio rather invest in single stock
Most of the investors invest only in one particular stock and waiting for earn profit only from that stock which is not a good investment decision. Investing through making portfolio is like you keep your money in different locations rather keep it in single location.
I suggest always try to keep at least 5 companies of different sectors in your portfolio with equal investment. This will brings down the risk of losing money. Because if one company share not perform well then other company share will compensate with their profit and keep your investment in healthy position.
- Don’t panic or easily react on current market
Most of the investors get easily panic or react on current market situation and sell out their shares without thinking in proper manner. In share market nobody can make profit overnight. You have to wait and show patience. The investor who put in money systematically, in the right shares and held on to their investments patiently have been seen generating good returns. Hence, it is prudent to have patience and follow a good investment approach.
- Monitor regularly
Good investment is not about buying at right time or holding for long period but also exiting when the tide turns against the company. Monitor your share regularly and keep the track of its performance regularly. Exit time is also very important but many investors due to hunger of profit never think in this manner. For example in case of Vedanta Limited, which already at its 52 week high and which already gives 90% of return in last one week. Now if investor still keep their money in this stock and wait for more profit then I only say this is bad investment approach.
I suggest always try to lookout good profit but never keep your investment just because hunger of profit.
So with the help of above mentioned points anybody can make good profit from share market. These are just basic fundamental points which every investor should follow in systematic manner. I again say that share market is very good potential market for investment besides you keep in mind above mentioned points.
If you still have any confusion or want some more clarification on this you can easily connect with me at firstname.lastname@example.org or at my facebook page @manishabhatia.rupayabazaar