14 things every stock market investor should do for good returns - FaqLabs

Thursday, 31 May 2018

14 things every stock market investor should do for good returns

stock market things to do for good returns


Stock market investing is not everyone's cup of tea but if done correctly it could make you rich. New investors and existing investors need to make sure they are on track and doing the right things to make any money in market.

Share market is a place that makes people rich and ironically it is also a place where people loose a lot of money too. Here are some basic points every investor should do to make good profits in share market.

1. Research before you invest
Stock market is one place where even the highly experienced people fail at times. It is one investment vehicle that can make you super rich and can also make you loose heavily if the investment strategy goes wrong. 

You need to do proper research before you go and invest your earned money. It does not mean watching suggestions from others on television , what it means is you need to have fair idea of what the company is all about, what is its future growth prospect and how much return it can give. You need to check all the basic parameters of the stock before you go for it. You need to check basic metrics to identify if the stock has good future or not.

Some of the things that you can analyse include P/E ration, a lower P/E would mean the stock is trading cheaply. This metric is helpful to compare stocks of similar industry and you get a fair idea of the stock you are interested in and the stock that is blue chip in that area. This however is a just one metric and may not give whole idea. Thus you need to go through other parameters which includes price to book value, return on equity, debt to equity ration and so on. 

You need to learn few metrics and assume on those parameters and predict the future. After all we are actually betting on future. So basically we need to go through a shares history, analyse its present and predict the future. That is all what it is. The one who predicts the future correctly and invests at right time is the one who becomes rich by this means.

2. Keep the trust and go long term
Once you have decided to invest in a particular stock on the basis of analysis that you did, you need to trust it. You cant just start doubting if the stock falls some percentages. 

In a stock market that is controlled by so many factors, you will always see market coming up and down everyday but if the company has strong fundamentals then it is bound to rise at some stage. And when it will rise it will give you returns that you had expected. If you jitter from the daily falls and rise then stock market investing is not for you. You need to have patience if you want to make good returns in stock market.

3. Be ready to book losses
An important point in stock market is to be patient with the investment and hold for long term. But the long term too has some limits, if you see the stock hasn't been doing good since a very long time then there is no point in waiting. 

You can't wait for eternity, so you need to identify the current status of company and reassess your investments. This you need to do regularly and make sure you are on right track. You should not hesitate to book losses if the future doesn't hold good for that company or else you may have to incur more losses than what you are currently facing. It is very important to asses your investment and take right decision at right time else this may become a loss making investment.

4. Stay away from penny stocks
Penny stocks are those whose price value is very low. Since the price of such stock is very less many retail investors are attracted to them thinking that in future they may rise and give them huge returns. There are stock which give such returns but many falter and either they fall or they never rise in years. Liquidity is also an issue with them since not many people will be available to buy them when you want to sell them. 

Thus penny stock are actually a good way to loose your money rather than making some. You need to be extremely careful when picking such stocks or else your money could get stuck. A better thing to do will always to remain away from such stocks and go for stocks that are trading in good volumes and are known companies. You may not necessarily want to go for bluechip's but not even penny stocks which are traded in very very low volumes.

5. Dont buy at once learn the art of averaging
One important think many retails investors don't do is averaging the  stock price. Averaging a stock market price is a starting step you need to take. When you buy a stock don't buy with the whole amount rather just buy use some percentage of amount you would spent and then buy rest of the percentage when the stock falls. 

You can do this over a period of time. What this does is, average stock price when it comes down and you are able to make more profits in the long run. You can also make use of this strategy while selling. Instead if selling everything at once make sure you sell in steps and make more profits.

6. Have a right mix in your portfolio
Building a right mix of stock portfolio is as important as it is to pick a stock at right price. It is important to asses your risk potential and build a portfolio of stocks. 

Instead of investing the whole amount on one or two stocks what you have to do is pick some good number of stocks from different industries and invest the amount on all those shares. Now what this does is it gives a balances approach and reduces the risk of loosing money. It is important to diversify on industry front because if you go in one particular direction and if the industry doesnt do well then you may be in trouble. 

So it is advisable to diversify your stock collection across industries depending on which industries are looking good.

7. Keep an eye on History
They say history always repeats itself. In many cases yes it does at least in stocks you will see many stocks doing well if they have done well in past. This is one simple indicator to pick a stock. If a stock has been doing well for last whole decade then there is a good chance that it will do good in coming years.

You need to keep your eyes open and identify such stocks and go for it. They may not become multibaggers but at least return good percentage. This is one factor you always need to consider while building your portfolio.

8. Book profits upon reaching targets
When you invest in a particular stock, you have analysed its history, its present and you bet on it for its future with a particular target in mind as per your calculations. 

Now when the stock reaches it target it is always good to go and book your profits or at least book some % of it. Having a clear strategy of booking profits is as important as picking the right share.

9. Have a strategy and stick to it
In stock market which is controlled by so many factors it becomes important that you stick to your plan no matter what. Its easy to get carried away in such environment and the key is to stick to your strategy in tough conditions. You need to be patient and execute your plan 

10. Know when to let go
In a fast changing world a company that was doing so well could go into situation from where it may not come out easily. When you identify such a thing happening to your invested stock its always better to get out and book losses. You need to keep an eye on your investments and take such tough decisions at times, So be ready for this always.

11. Learn from your mistakes and others too
Share market is on place where making mistake is a daily routine for many. It is no sin to make a mistake but it is important to learn from that mistake. Share market runs on the basis on emotions and you need to control your emotions to make most out of it. Learn from the mistakes that you made in past and invest for the future.

12. Dont intraday trade unless you are professional
Intraday trading is one aspect of market that lures many but most of the people fail to make money out of it. Only those with adequate experience and technical skills live up with profits while other loose on their money. 

Day trading is only for those who are professional and have good technical knowledge. For retail investors its always safe to stay away from this and concentrate on long term investing of delivery stocks.

13. Dont overanalyze nor completely forget about your investments
Always make sure you dont over analyse the investments. Dont track your portfolio daily it should not become your daily task. Rather you should have a periodic check on your investments and take decisions accordingly

14. Dont buy because everybody is buying
Share market is a place where you will see people running after stocks because everybody is buying. You need to stick to your own plan and go as per your own strategy rather than anybody else advice.

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