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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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