How diversified are your investments in the stock market? Chances are that you have understood the question or you haven’t, and you are trying to figure out the right answer that will impress the person who has asked this question. Investing in the stock market is not only about making profits, it’s about understanding the right time to invest, the right time to pull out your investments and the duration for which you will need to invest your money in the stock market. No, the stock market is not as complicated as we are made to assume. When it comes to investing in the stock market, here are a few things that one should remember before investing in it outright.
There’s a whole lot of advice on investing in the stock market, but there are some essentials that you will need to remember. Here are seven principles that will guide you correctly before you invest in the stock market.
1) Learning the basics: The economy is not as complicated as most of the newspapers and news anchors portray it to be. You don’t always have to be perplexed when you are faced with complicated words such as market price volatility or economic recession. Learning a bit about the economy and the stock market basics will always give you a good ground clearance before you begin investing in the stock market.
2) Know your Company: Yes, you have probably become fed up filling up forms where you have filled out information pertaining to your assets and investments. Similarly, find out everything you need about the companies that you are planning on investing in. Most of the information of the company’s financials will be available in the annual reports. It is possible to gain a trend analysis of the company by simply going through the company financials.
3) Select your portfolio well: While selecting the portfolio of stocks, choose your basket of companies well. Ensure that you read up on the history of the company’s performance. Each of the company’s performance should be analysed to give you a sneak preview of how your stocks are expected to perform.
4) Stay tuned to the news all the time: The more you are tuned onto the news, the more updated you will remain on your news. Get the latest updates from news sources and be abridged on the movers and shakers of the economy and the stock market. Even a quick glance of the news will give you an overview of your investments in the future.
5) Unity in diversity: It’s possible to have a steady stream of profits when you have a diversified portfolio. The amount of leverage that one receives by investing in a wide variety of assets can be seen as the benefits, despite the highs and lows of the stock market. Hence, you are not severely affected when the stock market witnesses a downturn and you gain reasonable profits in the upswing.
6) Stockbroker’s advice should be taken with pinch of salt: Don’t rely on the consultation given by your stock broker as that which should be written on stone. Even the stockbroker’s opinion is a biased one, it is important to have an overview of the investments before you take that final decision.
7) Greed is not good: Yes, don’t think that Hollywood got it right when they said ‘Greed is good’ in their iconic movie, Wall Street. It’s possible that eagerness to invest in young and emerging stocks can be encouraged, but do not always consider this quality to be the guiding factor for future investments.