Stock prices are subject to fluctuations, and these are a part and parcel of the stock market. The stock price may plummet the next day while the price might increase attractively in a bullish market. The stock market is a risky avenue. However, there are ways in which you can avoid losses. You don’t have to abstain from stock trading or stock investing. You just need to be a little wise when it comes to investing in the stock market.
You can grow your wealth in the Stock market if you invest carefully. But, there are also many ways to lose your hard-earned money by investing in Stock market. No investor buys securities or stocks that are expected to see a downfall in prices in the future. The possibility of loss in the stock market is always present although the investment objective for everyone is profits.
A lot of investors have made profits through stock trading. But it was possible because they’ve made some really smart choices by adopting carefully thought of strategies and good market knowledge.These investors are also disciplined in their approach. That’s why they’ve reaped the benefits of stock trading.
A long-term approach is an excellent way to grow wealth from investing in stocks, short-term goals can lead to substantial losses. Long term Investments in the Stock market allows investors to tide over market volatility and generate a substantial profit. Investments in Share market requires careful planning and an ability to stay focused on your goal. So, investors shouldn’t expect overnight profit.
Contents
Investors should take these precautions while investing in the Stock Market:
1. Keep Learning
Investors should gain some understanding regarding the market and economy before investing. Most investors start investing into the stock market without understanding its technicalities. It leads to wrong investment decisions.
2. Don’t Let Emotion Guide Your Investment Decisions
Investors get attached to a particular stock sometimes and ignore changing fundamentals. They remain biased to the decision and don’t exit at the right time.You should analyze how different events can impact the performance of company stocks while you invest.
3. Stock Picking Based On Strong Fundamentals
Investors take investment decisions based on the past performance of a stock. It is not the best approach since company fundamentals can change during the period. Investors must incorporate fundamental analysis in their investment strategy.
4. Don’t be influenced by unfavorable events
An unfavorable event may not necessarily result in a negative impact on the stock market as well. You need to analyze the possible impact of the event on the economy overall. Then you can come to a logical conclusion on the impact it can have on the stock market.
5. Diversification
Have you ever heard the saying –‘ Don’t put all your eggs in one basket’? This concept applies for Stock market investments also. Diversification should be the mantra for successful investing.
6. Track your investments regularly
Investing in stock market is not like a fixed deposit scheme where you invest and forget.Yo need to be proactive with your investments to gain maximum returns.You should be updated with movements in stock market. You should invest when the prices are low and sell when prices rise to make maximum profits.
7. Observe and trade
It is advisable to observe market patterns if you’re not as experienced as other investors.
8. Majority doesn’t always win
We consult many people to take the right decision in our personal life. But investors should avoid talking to a lot of people to avoid confusion and chaos.
9. Research the stock you pick
You should not pick stocks only because they are popular with other investors.You should research the stock before investing in it. Find out the company’s financial position, fundamentals, projected cash flows, market capitalisation, market sentiments around the stock, and prospects. Stock would not give you losses if the company is poised to grow and has strong fundamentals.
10. Hedge against losses
Hedging is also a useful tool that can help you prevent losses from stock investing. Hedging means cutting down losses from one investment by investing in another
CONCLUSION
Stock markets moves in phases. If it goes up during one phase, it comes down during another. It actually depends on the performance of the economy. A stock that gave certain returns the previous year, may not give similar returns in the current year. The returns will depend not only on the company’s movement, but also on market conditions and state of the economy. It is risky to depend completely on the past performance of a company’s stock.
Profits and losses go hand-in-hand with Stock market investments. You can use the tips mentioned here and minimize your losses, but there is no guarantee of avoiding them altogether.
Watch the video to learn some tips on” How to avoid loss in the Stock Market”, so that you can be careful with your investments.
We have discussed in the video “5 things you need to know before starting your investment journey”.