All investors need a plan with which you are thick and thin, no matter what the market does.
This is a general vision of small investors, who are new to the stock market, trying their so-called fortunes, wandering wealth, deteriorating, and staying out of the market forever. For those who are interested in the stock market, but have not been able to make their way through it due to inexperience or misinformation, I have listed some key aspects in the stock market based on my personal experiences.
- The Basics:- The stock market is a replica of life. If you treat it well, it will treat you back well. The stock market is not the place for a quick buck, for gambling, or for more nightly success. It is a place to make money for yourself in the long run. You don't need earth-shattering talent or knowledge to make reasonable returns in the stock market. Your investment principles and discipline are more important than knowledge of personal stocks, financials, trends, technical charts, etc. Go to the stock market only when you are ready to live long, take risks, and lose in your progress.
- Average:- Believe in the average and celebrate exceptions. Bell believes in the curve. 80% of humanity is average. We are all average outside our own regions. The stock market is no exception. In general, the stock market will give you a good return over and above the bank fixed deposit rate of return. Miracles do not happen every time. As a part-time investor, you can never hold the market when prices are low and sell stocks when prices are high. The stock market has an extraordinary return for beginners or amateurs, but it is rare, timely, and largely due to lucky stock picks. Therefore, always expect an average return on your investment with a few exceptions which can be absolute losses or very high returns. When your expectations are average, you will handle surprises better.
- Long term:- It is the single largest asset making factor in the stock market. As they say - no investor has ever lost money in the stock market, only traders lose. The stock market is not a 100-meter dash (leave it to Usain Bolt). This is a marathon. You need to hold stocks and run for a long time to make real money. Sleep on your shares. Stock price fluctuations on a daily, weekly, and monthly basis mean nothing because at times the prices fluctuate for no apparent reason (when the reasons for the fluctuations are not known, either crude oil Price or North Korea are blamed for this!). The other long-term principle has to be strictly followed due to a sudden crash in the stock market. The stock market always has the power to rebound on a short-term crisis, unless a large asteroid is moving toward Earth. Maintain long-term bank balance.
- Chakra:- The cycle of time is real. Repeat day and night. The season's repeat. Stock markets also go through a cycle of frequent fluctuations. Bull markets and bear markets keep pushing prices up and down. No trend is permanent. Impulsive reactions to prices can damage your portfolio forever without considering the stock market cycle. Do not react with the stock market when the stock market reacts to the news of an economic downturn or some other random news. If you remain involved in the stock market as an observer for long periods of time, all the cycles and trends will also prepare you to assign average returns.
- Risk:- Risk is inherent and integral to the stock market. There are no risk-free stocks. Profits are not guaranteed, but losses are guaranteed. Everything in the market comes with varying degrees of risk and you cannot avoid the risk. You can only reduce the risk. To reduce the risk, invest in small amounts spread over different time periods so that you get a better average price. To reduce the risk, stick with blue-chip companies and companies that make up the index (SENSEX, NIFTY, etc.) as these will be tried and tested companies. Alternatively, you can start with investing only in mutual funds (which are controlled by professionals in the field) and gradually progress to stocks. Risk is good because it builds your skills in investing.
- Stock picking:- No one has mastered the art of stock picking. Even the best experts can be wrong. To know which stocks to pick, you must first know what stocks to choose. Do not choose stocks based on friendly tips, neighbor tips, peer tips, company tips based on lifetime free analysis, SMS tips, tips on websites' discussion forums, or tips of your dreams. While some tips may work randomly, most accidental tips do not work. Stay within the boundaries of the industries you understand and develop basic knowledge about - the company's cash flow, earnings per share (EPS) ratio, price to earnings ratio (PE ratio), and industry PE ratio. There are tens of other parameters, ratios, and technical charts that can be analyzed and analyzed, but for each share you buy, the above criteria can give you enough information about whether a stock is worth it. And it's future. Once you select the stock that applies the above criteria, Murphy's rule will operate and your stock will start to fall while all other stocks go up. Ignore temporary movement.
- Exit:- The most difficult task is to figure out when to exit a stock. Here, humans capture greed. Even though the stock has given you much higher returns than expected, the mind keeps saying that the stock is double and triple and you are not allowed to sell it. Call that hard. Let go of greed and get out on a retreat before it's too late. Also, if you want to become another Warren Buffett, the last stockholder, keep your stock for the next 30 years (with a guarantee, of course!).
Winning in the stock market takes time, patience, little analytical work, and discipline. You will give enough knowledge to manage markets to thicken and accelerate learning through initial trial and error and failures.
Happy investing and staying in the market long!
