Investing in the stock market is one of the most lucrative ways to grow your money rapidly. But it is also riddled with risks and unpredictability. Investing in stocks is a complex process that requires a clear understanding of the risks involved, the highs and lows of the market, and the best time for investment. If stock markets have created rags-to-riches stories then they have also led to horrific losses with many going broke. Hence, learning the process and readying yourself as a stock market investor is paramount to your success.
Here's the beginners' guide for aspiring investors:
Investing in the stock market not only requires incredible patience and discipline, but also a great deal of research and a sound understanding of the market. Source material and information online or through newspapers and books, and study them. Talk to experienced investors for their insights. Then begin with low-risk stocks.
You need to be clear beforehand about your investment goals – what you want to achieve by investing in stocks and when. Make a list of your needs like child's education, daughter's wedding, funds for a house, or retirement money. Then invest in stocks that are most likely to give you good returns when you need them.
If you have fewer financial liabilities you can afford to take risks. If you have to depend on yourself financially, then it's not prudent to take risks. Losses, if any, will not just impact you but also others who depend on you. Thus evaluate your risk appetite and then invest in stocks.
Stock markets are unpredictable and so there's no right time to put in your money or exit the market. You need to develop an investment strategy by learning and decoding the market trends. Again, it requires a lot of research and experience to be a pro at this. A hunch sometimes could give you good returns on your investment.
Often it happens that you tend to invest in the same stock that people around you are investing in. This is understood as a typical buyer's behaviour. But this strategy is likely to backfire in the long run.