How to become rich by investing in the stock market? 5 tips to know

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By Anish Singh Thakur

Gone are the days when investments were restricted to financial experts only. With digital platforms and smartphones, the stock market is accessible to everyone. It has become an open avenue that welcomes even new investors to learn, invest and earn. While there is no shortcut to investing, following a set of rules and understanding the market can work wonders for beginners. Investing in the stock market comes with its share of ups and downs. It is important to understand that investing in stocks can be rewarding and even lead to losses. Market movement is not always up. So it takes time, patience and the right mindset to make wise investments.

Investing in the stock market can be long-term or short-term, depending on each investor’s financial goals. Here are some things to keep in mind to make informed investment decisions.

Plan and invest

The first thing to understand is that, unlike mutual funds, investing directly in stocks comes with its share of risks and rewards. Be sure to plan and determine an amount of capital before investing, as this is a slow and constant process. One of the crucial factors is to protect your capital by analyzing your risk appetite. Rather than blindly following the “high risk, high reward” philosophy, you should consider the long-term implications of your investments.

While deciding which stocks to invest in, consider your ability to sustain losses per trade. This will help you design a buy-back and exit plan in case the markets go down. Also, be sure to diversify your investments. It will maintain an equilibrium if the bid price of a stock falls. Investing in a mix of different stocks also helps reap greater long-term profits.

Understand the market

New investors should understand that stock market fluctuations cannot be predicted. Even seasoned investors cannot always accurately predict market behavior. It is important to understand how markets work. If one day the price of a stock goes up, chances are that the bid price will go down the next day. Therefore, it is important to understand the factors that influence the stock market. Getting an investment decision wrong is common, even among experienced investors. Here, be sure to focus on the long-term returns of the investments rather than the short-term losses.

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To be realistic

Amateur investors often expect higher returns immediately. For example, expecting to make more than 100% profit on stocks every year is unrealistic. Expecting returns of 20-25%, on the other hand, is a possibility. Although some investments can generate high returns, realistic investment decisions should be made. Setting achievable financial goals is the first step towards informed and strategic investments. Also, avoid diets that promise high returns in a short period of time. Before investing, be sure to do thorough research.

Avoid leveraged instruments at first

New investors should start investing in stocks in the cash division and refrain from leveraged financing. Leveraged investing is a strategy that aims to increase investment profits by borrowing money. These profits come from the difference between the investment return on borrowed capital and the cost of interest. The probability of making a profit increases, but the probability of losing money also increases. Therefore, investing through futures and options exposes an investor to higher risk.

just start

Many young investors go overboard when strategizing and buying stocks. Maintaining financial stability means keeping things simple. Keep your analysis as simple as possible. As stated earlier, the stock market is a volatile environment. However, you must ensure that your reactions do not reflect market volatility. Make sure you never make rash and immediate decisions. Instead of panicking about the performance of the stock, you need to develop an overall strategy and stick to it.

Last word

The stock market can be a very rewarding place to invest, especially if you avoid some of the pitfalls that most new investors face when first getting started. Beginners need to develop an investment strategy that works for them and stick to it through good times and bad, regardless of market conditions.

(The author is the CEO of Booming Bulls Academy. The opinions expressed above are those of the author and not necessarily of financialexpress.com. Please consult your financial advisor before making any investment decision)

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