Things To Keep In Mind Before Investing In Shares
08 November, 2021
You must have often heard people saying that the stock market is a scary place to invest in. It’s a volatile industry that changes trends every minute. Well, they aren’t wrong. The stock market can be a scary place for those who have no knowledge of the product or the nuts and bolts of the industry.
However, if you invest with proper knowledge, then the stock market can reap unimaginable benefits. If you are planning to invest in shares, here are a few things that you need to keep in mind.
Knowledge Is Essential
First and foremost, you need to research. If you have an overview of the stock market, then it’s best to dive deep into stocks and how the companies make money. Understand their business and how they are performing, what kind of services or products they offer, their flagship products, their growth chart and financial performance. At this point, you may want to shortlist a number of companies of your preference and check their stock performance in-depth.
Understand The Stock Market
Keep in mind that the stock market is unpredictable. It is not a money-making machine. A lot of investors make money only because they have an exhaustive knowledge of the companies and the trends. They made strategic decisions and choices to reach where they are. A lot of investors have gained and lost throughout their journey, so you too, need to be cautious in your approach. It’s important to make this thought the foundation of your decisions.
It’s important to ask yourself relevant questions like:
- Do I want to invest for the short term or a long term?
- What kind of companies do I want to invest in?
- How much can I afford to gain or lose in the market?
- Can I commit myself to the market?
- Am I ready to take risks?
- How long do I want to invest in the stock market?
Once you have analysed and dwelled on each and every question, then you are ready for this journey.
Be smart with your spendings. Invest only those funds which you can afford to lose. Don’t go into deficit just because you want to invest. If you already have investments in stocks, then limit your risk by re-investing earned dividends in new stocks instead of taking money out from your savings. The more you keep away from your margin and play with the surplus, the better will be your experience in the market.
Additionally, it’s best to avoid herd mentality or making decisions based on emotions. Have a strategic approach to your investments.
You have probably heard this phrase before ‘don’t put all your money in a single stock’, and it’s true. Diversification is the key to growing investments. Diversify your money optimally but avoid over diversifying it. The best way to do it is by balancing your investments, for example, if you have stable growth from your existing shares, then maybe you can afford to take more risk by investing in high-risk stocks.
After doing everything, If you still find the stock market scary, then it’s best to turn to professional help. Sure you will have to pay these professionals a commission, but they will reap benefits.
If you already have an existing stock portfolio and want more funds, then why not leverage it further by getting a loan against shares? A loan against shares can be availed at low interest rates. You can keep your shares as collateral and get funds on the value of your portfolio. You can repay these funds with flexible payments for the principal amount and fixed payments for the interest. Moreover, these loans come with no prepayment penalty or credit eligibility requirement. If you get a loan against shares, then you won’t have to sell your portfolio and you can even enjoy dividends in the long run.
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