Keeping aside the knee-jerk reaction of the stock market to the Union Budget of 2018, it has been a bullish run for the stock market with BSE around the 35,000-mark. This presents a potential opportunity for first-time investors to get into the game and start stock trading. However, if you are a first-time investor, you need to have a measured approach to stock trading.
Here are certain factors that you need to consider before investing in the stock market.
1 – Don’t get carried away by the new highs– When the stock market crossed 11,000 benchmark points, the optimism prevailed in the market. Many new investors especially the ones who were drawn in by the profits started investing with a view to earning yields. But they ended up doing some costly mistakes.
Before participating in the stock market, the investors need to keep in mind that once the index has crossed the benchmark level, every new level is a new high and there is nothing astonishing about it. Don’t treat it as an immediate call to action. Rather stay focused on the present stocks and how they would perform and discard the narratives floating around.
2 – Don’t sacrifice quality for quantity– Investing in the stock market is a roller coaster ride. Sometimes the stocks will behave in the manner as expected and sometimes they will dip. But it is not a reason to worry because a high tide in the stock market allows even the penny stocks to soar. So, don’t use them as a price indicator of how good the stock will behave.
Before investing in any stock, think about the reasons why you bought a stock. Pen them down. Don’t take chances by investing in over-hyped stocks or unknown IPO’s that can do more damage to your portfolio. Buy the stocks of a company that is well-established and has a good track record and performance numbers. After all, you are investing your hard-earned money, isn’t?
3 – Don’t equalize your returns with what you have gained in the short term-Thanks to the demonetization, today the equity markets are making the front-page headlines, even the rural investors are taking notice of it. Though the equity shares help to battle you against the inflation but be cautious, don’t equalize the returns gained in the short-term when participating in the equity market. A bull market attracts the buyers and makes them believe that best is yet to come.
But be cautious as this would not be the return that you would actually get. There would be an inevitable correction in the future, and the stock may fall too, so eventually, the returns will average out over the passage of time, and the windfall gains will buffer you in such times.
4 – Don’t give up– When the stocks are falling down, you may feel like giving up, but we advise you don’t give up in haste. Stories like how someone has burned his/her fingers in the stock may create anxieties, but actually, no one knows how far your stock will be able to run. So, the quintessential part is to be hawk-eyed about the loss, but don’t think much.
The stock market is a gamble, sometimes you may win, and at other times, you need to pause and think about the strategies. Here we have mentioned some of the sensible approaches that the discerning investor need to take care of before participating in the stock market. Participating with information and preparedness will help you in the long run.