This article on the stock market will help you in fulfilling your dreams. We will help you to get the right answer of “How to make money from the Stock Market?”
A stock market is a place where every day a story of a new king and poor is written — one gains money and the other losses money. That’s why many new investors think How to make money from the Stock Market?
“If you do not have dreams then how will you fulfill them? So, have dreams and also take steps to fulfill them.”
In the stock market, every investor seeks a new opportunity. However, the fact is that making money is not so easy especially from the stock market. So Let’s begin, How to make money from the Stock Market?
How to make money from the Stock Market?
Making money from the stock market requires discipline, good strategy, and patience. There is no shortcut formula to make money from the stock market. However, there are some mistakes that every stock market investor can avoid.
“Do not put all your eggs in the same basket.”
It is traditional thinking that putting all your eggs in the same basket may prove very risky. This same thinking exactly applies to the stock market.
Ram and Rohan both are investors in the share market. Ram spends all his money on purchasing the shares of a single company. On the other hand, Rohan after doing intensive research invest his money in the stocks of 10 companies.
If one or two stocks of Rohan perform poorly, he can get a good return from other stocks.
In this case, Ram has taken the higher risk. If the stock of Ram performs poorly then the decision of Ram to invest in a single stock proves very wrong.
How to reduce risk in the Share Market?
“Higher the risk, greater the reward”
In the Stock Market, This statement is considered a quite presumption. If a new investor invests in following this thinking, he may face loss. Therefore, It is necessary to reduce your risk as much as possible so that the returns are not affected.
There is a simple way through which you can reduce your risk without compromising your returns. This is “Diversification in the Portfolio”.
In Cricket, Which is a team game, If a player does not perform, you can expect from others.
Similarly, If in a Portfolio, there are 10 shares, and one does not perform well then this can be e compensated by other shares. Diversification in investments is one of the most important things for investors. Investing in many stocks can save you from facing huge losses.
Important of Diversification
1) Purpose of Diversification
The main purpose of diversification is to reduce risk. Some investors diversify their stocks for balance returns. You need to know the purpose of diversification.
If your prime aim is to reduce risk then you will invest in large-cap and Mid Cap stocks. If higher returns are your aim then you will invest in small-cap stocks.
2) Style of Investing
What stocks do you give more value to is a very critical part of your decision-making. Your attitude depends on your style of investing.
- If you are aggressive then you should choose large-cap stocks.
- If you are moderate then you should choose midcap stock.
- And, If you are a very conservative person then an option for small-cap stocks.
Investing in these stocks also depends on your budget.
3) Total Capital
Total capital plays a noticeable big role in the diversification of stocks. If you have more capital, you can invest in many different stocks.
Warren Buffet One of the biggest investors of the world) Said,
“The stock market is a place designed to transfer the money from the active to the patient.”
Patience is a must for successful investors in the stock market. Without having patience you will not be able to make money. If you do not have patience the most chances are that you will lose your money.
How to do diversification:
Before selecting any equity or stock, You must take care of three things.
- Companies past performance and track record of management.
- Company’s potential market size and customer base.
- Company’s unique product and customer base.
After understanding the above three things you should do the following things:
a). Create a Portfolio of 10 – 12 stocks and monitor them:
For an investor having 10 to 12 stocks is particularly important. With this, he will be able to adjust his portfolio according to the market and he can also see the impact of market changes on his returns.
b). Decide borderline while Investing:
A time frame is a must for any type of Investment, It reflects your rate of return. Similarly, A share investor must decide a borderline before investing in the share market.
c). Do Research:
A new Businessman before starting his business research customers demands. Similarly to create a good and solid portfolio enough time, good Research and good homework are very important.
These above-mentioned things will help an investor to make a good investment decision. At this time you all understood How to make money from the Stock Market?
Do’s and Don’t while Investing
If you are a new investor then start with the smallest money. Investors should start with a very small investment and gradually increase.
If you start to take chances in the stock market at a very early age then you will get enough time to increase your profit and decrease losses.
Research before Investing
Very few investors do good research before investing money in the stock market and because of that sometimes they face heavy losses. Therefore, every investor should have some knowledge about the company.
Have an investment goal and then build a Portfolio around it:
You should first choose your goal and then do a selection of your stocks.
Do not take investment as Gambling:
You should not treat the investment as gambling, You can apply game links rules here.
Do not have unrealistic expectations:
You should never think that you will double or triple your money by investing in the stock market. Things do not change in a single day, you should remember this while investing in shares.
Do not follow the herd
This is very important for investors to not follow the herd mentality. You should have a unique style of investment. You should invest in keeping your goal in the mind.
Every Investor should follow these do’s and don’ts.
Diversify your portfolio: Keep more stocks in your portfolio.
Shortlist shares according to risk appetite: Purchase shares as per your risk appetite.
If you want to take a low-risk then choose 5 blue-chip companies.
If you want to take the medium risk then choose 2 blue chips and 3 Mid Cap companies.
If you can take high risk then choose one Bluechip and one Mid Cap and three small-cap companies.
Tracks shortlisted companies for a week: Track shares of blue chips, midcap, and small-cap companies for a week. Keep monitoring changes in which shares with this you will know how to create a Portfolio and what share should buy.
Invest in more stocks to reduce risk and research a company before investing as well as follow do’s and don’ts mentioned above in this article. I hope you all get the answer to How to make money from the Stock Market?