Tricks to make money in the stock market - IndianMoney.com

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Tricks to make money in the stock market :

                 

You must have watched a lot of cricket. In cricket each top order batsman has a particular style of batting which makes him unique.He continues in the same style of batting for many years with minor modifications and accumulates lots of runs.

In the same way, as you invest in the stock market you need to learn certain methods which if successful can define your style.

Don’t buy too many stocks:

Select certain good quality stocks and stay invested in them. You do not need to pick 100 stocks and invest small sums of money in them to become rich.

Pick your winners. Select about 15-20 good quality stocks (Preferably good blue chip stocks) and stay invested and accumulate them when their price falls.

Pennywise pound foolish:

You might believe that buying a stock which is cheap is a good idea. Stocks are available for INR 10 and INR 50.These could easily double.

The blue chip stocks cost a lot of money. Maybe a couple of thousands. Why buy such costly stocks?

If you could buy about 200 shares of INR 10 each of a cheap stock and they were to increase to about INR 20 in a few months your INR 2000 would be INR 4000.But does this happen? Most of the time No….Stocks are cheap for a reason. If a stock has poor fundamentals and a low chance of making a profit (earnings are not good or too much debt on its books) it might not do well. It would remain cheap or even reduce.

If a stock is costly (say a couple of thousands) and its earnings and growth prospects are good it might rise rapidly in a bull market.

You need to buy few but good stocks.

Analyze your successes and your losses:

You need to study how you have made your investments and see it you can detect any flaws in your trading.Did you buy the stock at the right price? Did you sell it at the right price? If No Why…What could you have done better?

Practice the art of diversification:

“Do not put all your eggs in one basket”. Invest in different sectors and invest in the market leaders in each segment.

Even if certain sectors do badly certain other sectors would do well. This means your portfolio stays protected.

“A rising tide lifts all boats”

In a bull market even stocks which have weak fundamentals rise. You need to make a note of the stocks in your portfolio which are not doing well.

You must sell these stocks when the stock market is in a bull run. There is no better time to get rid of the stocks in your portfolio which are doing badly.Use bull runs to get rid of fundamentally weak stocks and bearish periods (times of weakness) to buy and accumulate good quality stocks.

Finally history always repeats itself in the stock market. Think you have missed the bus….Fret not. Stock markets always give you a second chance to correct your mistakes.

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Learn how to invest in the stock market - IndianMoney.com

About IndianMoney.com : 

IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial product.

Learn how to invest in the stock market :

There are no born geniuses in the stock market. Investing in the stock markets has to be learnt.

You learn by experience and the simple word….Practice…Practice…Practice…

Learn before you earn:

Before playing a game you have to learn the rules of the game. Investing in the stock markets is similar.

Learn before you earn in the stock markets should be the rule.

Read books on stock market investing. Read newsletters on investing in the stock markets available for free on the internet.

Simulate:

Choose some of the stocks traded in the stock markets and note their price movements with time.

You don’t have to invest any money in the stock markets. You just observe and study the prices of stocks with time.

There are many mock portfolio’s available online where you can create your own portfolio (collection of stocks) and observe their price movements with time.

You don’t have to invest any money. You just have to choose your stocks and add them to your portfolio.

Once you actually invest you will have an idea of which stocks to buy and at what price.

Collect money:

You need to have a steady job before you invest in the stock markets.

You first need to have money to manage your day to day expenses. You then need to create an emergency fund with about 6 months of expenses.

If you have excess money (which you can afford to lose) only then invest in the stock markets.

Start small:

Remember you are a novice when it comes to investing in the stock markets. Always 

start small. Play safe.

Pick up only blue chip stocks (Stocks of big Companies with strong fundamentals) .These stocks might be costly and you can buy them only in small quantities.

Never mind…slowly accumulate good blue chip stocks.

Average your purchases:

Stock markets rise on sentiment and emotion and not on fundamentals. If bad news abounds in the stock markets even good quality blue chip stocks will crash.

This is a time to accumulate on these good quality blue chip stocks and increase the size of your portfolio.

Use the method of averaging. If you have bought good quality blue chip stocks for a higher price you can increase their number by adding to them at lower prices.

This technique is called averaging and is the path to riches.

Hold on to your stocks:

You must hold on to your stocks for several years perhaps forever .Ideally set a time horizon (period for which you will hold your stocks) as 5-10 years.

What if your portfolio has risen 50% or even 100% in a year?

If you buy reputed blue chip stocks with strong fundamentals you will never need to sell them.

If the stock runs ahead of its fundamentals (Its real value is much lesser compared to its market price) then you must sell this stock.You can then re buy the stock when its price falls.

Investing in the stock markets is not rocket science. If you follow tried and tested rules it can be quite simple.

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