It is important to acquire a good amount of information and understanding of stocks and shares before starting investment in financial market. Consistent investment while avoiding financial risks would help save a notable amount of money in long run. Find below some tips to help you kickstart your financial journey with a bang.
Set your targets
It is essential to set long term goals to achieve significant benefit when you invest in mutual funds, stocks and shares. When you set long term objectives it helps you make better investing strategy whether you want to save for retirement or any other important large expenses in future. To grow your portfolio consistently at a good annual rate focus on few different factors such as how much capital you invest and how long you invest for. Start investing early to increase chances of saving large amount of money.
Measure the risk
You must assess meticulously any risk involved with the option you choose and invest your money into. Find out potential risks of each product you consider investing. Measuring the risk would help you avoid things which could lead you to losses.
Command over sentiments
It is of utmost importance to be in charge of your sentiments while investing in financial market. The sentiment of market towards a company reflects in the price of that company’s share. Those investors who positive about the market are called “bulls” and those who have opposite view are called “bears”. Changes in stock prices are reflection of tussle between the bears and bulls.
Research the Financial Market
One must research thoroughly about different aspects of the financial market before starting to invest in any stocks and shares. To make the right decisions focus must on areas such as different types of investment options, techniques of selecting stocks, good read of fundamentals of companies and timing.
Diversification of portfolio
For beginners it is important to understand what is diversification and how it works. Most well-known investors diversify their portfolio. If you are just starting your investment, then you must gain some experience in stock market and then slowly start diversification. It is one of the most preferred way to manage risks and avoid losses. For example there could be a situation where shares of two companies may decrease by !0-12%, the shares of three other companies increased by 30%, Since there is a loss in the first two companies, diversification can help you recover these losses and even gain overall profit through profits from the other three companies, therefore making diversification a better option than if you had invested in only one company.
When you borrow funds to invest in stock market is called leverage. If you have margin account then, brokerage firms and banks could give you loans to buy stocks and shares, generally 50% of face value. For example, you decide to buy 1000 shares for 100 each, the total cost would be Rs. 100,000, the purchase can be completed by a loan of about 50% (Rs.50,000) from a brokerage firm.