Investing in stock could get you a lot of returns and can also beat inflation if done wisely. But if one wants to invest randomly without giving it a lot of thought, then they could end up in loss and losing a lot of money. There are a lot of factors to keep in mind before investing in stock; it cannot to studied in a day or two but is a continuous process as the market keeps changing. Let’s look at a few things you must know before investing.
Don’t expect your money to double or triple as soon as you invest. There are stories you would have heard where investors made a lot of fortune by investing in stock, which is true, but it did not or cannot happen overnight. One needs to learn about the stock market and spend a lot of time understanding the strategies before investing.
Devoting time to learn the basics can be rewarding. Educate yourself about the securities you plan on investing in a broader economic sense. Analyse the relationship of the market with economic factors such as GDP, inflation, rupee value etc. Don’t jump into the market without knowing about it.
Like every other investment, the stock market ha sits own share of risks. It is important to keep in mind that your money is involved and you must only invest what you can afford and not a penny more than that. It might be tempting to invest a lot of money and double it, but the market is uncertain, and it is wiser only to invest your surplus money.
Banks and brokerage firms usually lend money to investors, and this is known as leverage. Leverage can sound like a great idea when the stock market is moving upwards, but on the contrary, if the stock market is doing bad, you might end up with debts. Borrowing leverage is not a good idea, but if you have good experience and confidence, then you take a calculated risk.
Just because your friends or relatives have invested in a particular stock doesn’t mean you have to go for the same without any prior analysis. Herd mentality and the tendency to invest in something just because everybody else is doing it must be avoided.
It would be best if you don’t put all your money on just one stock, you must diversify and divide. After dividing, you should understand and analyse as to what might give you profits and invest in those various stocks. But fragmenting your money and investing it in too many stocks is also not a good idea.
It is important to keep a check and monitor your investments; you can’t invest today and forget about it for a few days as you wait for it to suddenly double one day. You must be aware of what is happening and stay up-to-date on the stock industry.