How to Make Money in the Stock Market? : Almost all of us are looking for easy and quick ways to make money. Investing in stocks is one of the attractive ways to get rich. However, it can be a daunting task for novice traders and investors as the opportunity of losing money is equally high in stock trading.
The stock market is full of uncertainties due to volatility. It is a serious commitment which needs oodles of patience, focus, discipline, nurturing and constant updating of knowledge. Only a few people actually know the key to success. You must have come across stories of how a person made a fortune or was brought to the streets due to poor investment strategies.
Although there is no sure shot formula for success in the stock market but there are some golden rules which, if followed prudently, may ensure good returns. Before you take the leap to purchase, read the complete guide on the basics of making money in the stock market. so here below are answer of How to Make Money in the Stock Market?
A Complete Guide to How to Make Money in the Stock Market?
Follow Fundamental Approach
There are speculators as well as fundamental investors in stock market. To earn good returns, you must follow the fundamental approach of investing. It involves focusing on the fundamental strengths of the company rather than focusing on the price of the stock. One should look at the key parameters to assess the prospects of a company like the quality of management and corporate governance, financial performance, the potential of the industry in which the company is performing, etc.
Diversify Your Portfolio
Diversification of a portfolio is the best strategy to minimize the risk and earn optimum returns on investments. One should have a proper mix of stocks from different sectors and asset classes. So if one sector or asset class is under performing, you will still make money from the other sector or asset class in your portfolio which might be doing well. The level of diversification may vary from investor to investor depending on their risk appetite.
Set Realistic Goals
It is good to be positive and have expectations from your investments, but remember do not have unrealistic expectations. One should set realistic goals which are achievable. There is nothing wrong in setting a low but realistic goal rather than the high and unrealistic goal which will only give disappointment. When volatility or correction hits the market, stay firm on your goals. Do not panic and make wrong decisions.
Do Not Become A Part Of The Sheep
Warrant Buffett once said, “Be fearful when others are greedy, and be greedy when others are fearful!” These lines clearly state that you must not be influenced by the actions of others. Investors have a tendency of following the herd when it comes to investing. This strategy might work once or twice but is bound to backfire in the long run.
Take Emotions Out Of The Equation
Fear of losing money in stock market and greed to earn more money are two emotions which act as the biggest hurdle in the stock market. People who don’t know how to control these emotions often lose big. They tend to get carried by the short term market volatility. As soon as the market sees a downfall, they start withdrawing their money for the fear of additional losses. Similarly, in the bull market, they fall into the trap of making quick money and start investing in unknown companies without considering the risks involved. Thus it is advisable to ignore stock market cycles and put your emotions aside.
Research Well Before You Invest
You can earn good returns only when you do a proper research before you invest your hard earned money in the stock market. You must gain knowledge about the stocks you are planning to invest in. Look for the company’s historical performance, Price Earnings ratio, dividend paying capacity, Earnings per Share ratio, etc. and analyze if it is a worthy investment.
Do Not Time The Market
One thing which you should definitely avoid is to time the market. Investors have a tendency to make buy and sell decisions by attempting to predict the future market price movements. However, trying to time the market especially in the case of the bear market can further compound losses in your portfolios.
It is a well-known fact that everyone who shows patience in the market earns handsome returns. Patience is the key to success in the market. The returns on stock multiply with good performance of the company. To reap the benefits of efficient performance of a company you must hold your stocks for a longer duration. Higher the patience, more are the returns.
Monitor Your Stocks Regularly
Monitoring your stock investment is very important. The domestic and international events have a great impact on the financial markets, so it is necessary that you are aware of the global situation and its implication. If you expect any global scenario that is negative for the market, you can sell your stocks for profit and re-enter at lower levels. Thus, monitoring your portfolio is a part of the investment. However, if you are unable to do so then you can take the help of a financial planner to take care of your portfolio.
Invest Your Surplus Earnings
When you enter the stock market, it is always advisable to have some surplus cash in hand. The extra cash always comes handy when there is a sudden downfall in the market and stocks are available at cheaper valuations. In volatile markets, if you are willing to take the risk, you can invest your surplus earnings in the market. By doing so, you can make a good amount of profit in the short period of time.