To a new bee, stock market may seem complex given the number of derivatives, stocks and indicators with the only principle they ever knew being "make profits, sell high & buy low". But is that all? No! To be successful, there are a number of things that you'll learn over the time but there are some simple yet powerful rules that might help you establish yourself in the long run and give you a good start. This knowledge is not restricted to the people coming from financial and commercial backgrounds. Any layman can implement these rules and see a positive outcome. For example, if you are someone whose full time job is not trading in stock markets and you have little to no knowledge about how to invest in stocks, then these simple rules, if you abide by, might help you in making stable investments.
What is investing in Layman terms?
Investing is simply putting your money into buying a small portion of the company (share) which helps you to gain profits or you may end up losing as well. The key is to have a plan and plan is structuring your time frame of the investment, knowing about the market, building strategies which suits you, and to make yourself comfortable that it takes time and a long journey ahead of you to be certain not to be afraid of minor short term setbacks.
The wise rules to invest (Simple yet Powerful)
Think Long term
As it said that you must buy something which you will be happy to hold even if the market is shut for years to come and such should be your investment plan. If you need to build a good portfolio the first step is to build patience because most of the investors in the market need quick return, they wish to have two to three times of their investment within months which isn’t possible as money doesn’t grow fast as you plan in your mind. Long term is the simple yet effective key to be implemented in your journey of investing.Focus on Total ROI
Whenever you invest, plan out the return on your investment which you be getting after a specified portion of time. This trick is to keep a check whether you are losing out or not on a certain portion of your investment or could have invested in a better choice through that sum.Take Expert's Advice
If you are able to research and analyse the market well, then it’s all for good but we tend to get demotivated or over enthusiastic by our way of researching and we often think that we must not seek any external help for our investment. This simple yet effective technique of taking expert advice may help you to avoid losses and puts you in a profitable state otherwise. Never be hesitant to seek help from an expert of the market.Diversify your portfolio
Diversification should be one’s motto as it helps to reduce the loss and the risk to a great event. It might look easy and sometimes even foolish to have options and not be concentrated to only one investment that makes you the maximum profit but you do not want to go down that road as you are left with nothings but failure and huge losses. Diversifying properly helps you to reap benefits which makes you happy while investing in the long run and do follow the advice “putting all the eggs in one basket never results in good.”Avoid Emotions
People are made of emotions and it is the sentiments which runs the market as well. Thought there are lot of other factors and there tends to be a lot of fluctuations which might arise due to these. Short fluctuations might be set backs which you carry your whole life and might think to never invest again. Never make that a strategic decision based on your emotions and only take a break if you lose the financial standing and not on sentiments.Analyse over investment options
There are a lot of investment options out there. Investing is not based for the rich class to watch their money grow. Even if you have Rs. 1000 to invest, go for it because there is no right time. You create that time for yourself but the secret is to invest what you can, do it right now to have hassle free future analysing all the investment plans for yourself.Give Time and don't invest beyond your means
Since we talked about long term plans, the weightage given to time and patience is massively important. The rule is when you believe in something, and if you have the capability to invest in it, that should be your bull’s eye considering you do your research well (or ask an expert). The subjective not to go beyond your means is when you start borrowing or invest your entire amount even when you are not able to meet your basic requirements. Investing as a practice should be carried out on surplus and not to invite troubles for yourself.
A final thought
These simple rules can guide you to invest and never to lose hope in your trading life. The final trick is to get wiser each day when you invest and understand your own style of doing things and getting through the options of investment and analysing the market on a daily basis. The big guns today started some day with some tricks. If you wish to be one, get going.