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Trading seems to be something of a mighty folk tale fro many. Terms like fundamental analysis and candlestick charts help depict the image of one needing to be extremely gutsy, quick, and intelligent to trade in the stock market and walk out as an experienced investor.
Very rarely do we laud the common retail investor who put in a little bit of their savings and still manage to withdraw a sizable return over the years of turmoil; and these players have been growing consistently over the last decade and have become a significant contributor to the equity market.
There was a nip in the stock exchange before the lockdown, but paradoxically there has been a 22.5% increase in the number of DEMAT accounts opened.
With this, there has been a surge in the influx and the cash circulation in the market even with economic activity and unemployment rates at questionable numbers, the stock market is still marching ahead and everyone wants to jump into the bandwagon for a source of passive income.
Now as investors, one might wonder how to safeguard the money invested in the rick rollicking market which seems to have reached a certain amount of stability as compared to a few months ago when circuit breakers were implemented every alternate week.
Here are a few thumb pointers one can keep in mind before dwelling into the integrities of proper analysis, interpretations, and simulations:
1. Identify what kind of an investor you are:
Even in these tumultuous times, people are infatuated with the concept of earning big and quick. And if your appetite along with your disposable income fits this, why not? There are huge gains being made in the market even with such a dynamic economy with conglomerates such as Reliance and TCS leading the pack. The majority of Indians however, are more risk-averse and are still skeptical about the longevity of stocks. It’s advisable to follow the same: Invest only what you can afford to and look for beaten-down values of shares, they may surprise you.
2. Use SIP plans:
Many banks offer a certain portfolio of highly rated and diversified stocks, something along the lines of a mutual fund. With these diversified stocks, one can pay towards a Systematic Investment Plan which not only accumulates in your portfolio but also helps mitigate one’s risk. 3. Blue Chips :
The common tales of woe you hear from your parents and grandparents still hold true. If they have invested your savings in XYZ company years ago, they would’ve bagged multifold returns. The recovery after the crises that hit the world, as early as 2009 was swift and high. Now is the best time to buy stocks that are trading at generally low prices and if all goes well, you can tell your descendants the story of how you seized the day.
4. Large Cap:
Look at investing through a longevity standpoint. The best and safest way is to invest in large-cap stocks that give you a good dividend yield and a steady return. Trusted and dependable companies are Nestle, L&T, and Bajaj Auto. FMCG stocks are the tall standing mountains that withstand the tests of time and are a dependable source of steady returns over the years.
5. Follow Sectors :
Stocks belong to various sectors, and some of them move in sync with the economy. A good example would be, during the financial crisis in 2008, banks stock took the heaviest toll compared to the others. During the current times, technology, pharma, and agriculture are the winners as they are the need of the hour. With further dependence shifting on to them, their overall value rise.
6. Set your own Stop loss:
A stop-loss order is a certain threshold that one keeps for a stock, and if it reaches a certain point, meaning to sell the stock in order to limit loss of the investor. It’s a good way to keep your net position intact and it’s an engaging way to keep tabs on your stock movement.
Trading in the stock market is fun and if one works on just observing cyclical trends that happen with the market forces, they can go on to help you become Bill Ackman. A war chest is always required when dabbling in the stock market because everything is fickle and always fluctuating. Investment in gold has reached an all-time high, as it’s highly liquid and a good safety net for investors who predict a potential crash in the near future
Now is a great opportunity to accumulate wealth in shares that will prove to be highly beneficial once the world economy is restored back to normalcy. But continuous reading, watching, and learning is required to abstain from foolhardy decisions.
Disclaimer: Investments are subjected to market risks, please consult a registered investment advisor before investing. This article is for knowledge purposes only.
Written By: Rohann Abraham