Investments in the share market are assumed to be like bets. Because there is no guarantee that a trusted company will make profits for sure; a few organizations’ value decreases over time and vice versa. Also, individuals are responsible for losing money in a way. Opulent individuals or newcomers blindly invest in the stock market and enter the race of claiming shares from iepf after seven years whereas the rest keep tracking the market changes to make the right decision.
It is sad to know that many beginners lose their hard-earned money due to a lack of knowledge. This is why a list of tips is provided for assisting budding investors.
- Financial goals
- Invest early
- Avoid market noises
- Diversify
Financial goals: The enthusiasm to increase your wealth is human and acceptable. But making an entry into a stream with partial or zero planning will drop in trouble. The first thing to consider before choosing a company to invest in is to realize your financial goals. Long-term investing is fruitful however, letting a major sum grow for ten years without the consideration of your unexpected or immediate monetary needs can attract bankruptcy.
What would happen if you invested all your savings into a market without having an additional sum to meet emergencies? A need for loans and borrowing cash from close friends and family members may arise which can weaken your social connections alongside your reputation.
In short, ensure to distribute money to every aspect in a way that you wouldn’t need to seek financial support or another approach would be to set short-term goals which are nothing but targets to be achieved within a period of six months. The goals that have to be achieved within three to five years have to be planned as well to stay on the safer side; medium-term goals.
Invest early: If you prefer to be a long-term investor, develop two abilities; patience and discipline. Let compounding take the charge by investing in the early stages of your career. An individual who starts investing in plans like SIP at the age of 25 can peacefully retire at 60 years without having to worry about their health and income-earning capacity in their latter age.
Avoid market noises: As discussed earlier, patience is the most valuable asset. Never get carried away with news or other sources of information that trigger fear in you. Stick to your goal, analyze things yourself or hire a professional to guide you.
The mistake of disturbing the investment can cost your peace of mind and potential gains. Because everyone who shares opinions on market fluctuations is not an expert in analyzing the conditions in the stock market.
Diversify: One of the worst decisions to make is to depend on a single investment. Yeah, you read it correctly. As mentioned in the first paragraph, there is no assurance that your chosen entity will make progress in the future. This is why prefer the distribution of savings into various streams to reduce the risk of loss. You can distribute your holdings in a variety of asset classes; bonds, equities, gold, and many others. This tip is a saviour as market events do not uniformly affect all the asset classes. In short, this is a hedging strategy that will assist in balancing reward and risk to stabilize your portfolio.
Bottom line
From the above, it is evident that long-term investors must enter the financial market at an early stage post working on their financial goals alongside developing patience and discipline to wait until maturity and then root for claiming shares from iepf if they are shareholders. Also, another tip is to turn a blind eye to the opinions and advices of fellow investors or non-investors. Last but not least point is to consider diversification of portfolio for mitigation of risk and increase of returns.
