What are some of the key factors to consider when investing in stocks?

Answer 1

You might be one of the many looking to make some money by investing your savings in the Stock Market. It is important for you to know people do burn their fingers in the stock market. There are no rules which can guarantee you to generate great returns from the stock markets, however, there are some stock market tips that you can follow for getting good returns in the long run.

1. Understand the market and invest wisely:

In case you are new to the stock market, ensure that you spend at least three to six months in understanding how they work and take proper stock advisory from finance professionals. You must know that the stock market investments are full of risk.Usually, the buyer's decision are heavily inclined towards the actions of his neighbors, acquaintances or relatives. Ensure that you invest after a careful study of the respective stock.

1. Don't believe in rumors and make an informed decision:

Never invest your hard earned money on rumors. You might earn money in few cases, but in most cases, you will lose. Do a proper stock research before investing. Normally, investors go by company name or by the industry to which they belong. It is not the way you should invest. Do a thorough research before investing.

1. Understanding the business:

Ensure you understand the business of the company in which you are about to invest. It is the company's performance which would earn you money in the stock market. Before you invest in any stock, you must understand its business.

1. Be disciplined and do no invest in multiple options:

Traditionally it has been seen that even the great bull runs have panic moments. Therefore, it is practical to maintain patience and have a disciplined approach towards investment keeping the long-term horizon in mind. Also, do not invest in more than ten stocks at a time as it would be difficult for you to track the performance and study how the companies are doing.

1. Don't be emotional:

Most of the investors lose their money in the stock markets because of their inability in controlling their emotions, predominantly greed and fear. Greed and fear are the wickedest emotions when investing, and it is imperative not to be directed by them.

1. Have a diversified portfolio:

Your investment basket should comprise of a diversified portfolio across classes of asset and different instruments for earning optimum returns with least risk.The level of diversification will depend on your risk appetite. However, it is always advisable to spread your investment base over several asset class for reducing risk.

1. Don't have unrealistic expectations:

It is good to hope for the best from the investments, however, you may head for trouble in case you have unrealistic assumptions with respect to your financial goals.

1. Invest with your surplus funds:

It is always advisable to invest your surplus funds only. In case you invest your money which you might need today, you might need to sell off your investment at a loss in case of urgent need. You must invest the surplus funds which you do not require for ten to fifteen years. In that case, you can wait and sell off your investments when the market offers best returns.

1. Keeping a check on the portfolio:

Today, we live in a global economy. Any significant event anywhere in the world has some influence over our financial markets. Therefore, we are required to continuously observe our portfolio and ensure timely alterations to it.