Strategies to invest in the stock market

We have heard or seen very often, when the market is up, people start investing and when it is down people start selling. This trend is actually with novice investors who are very punctual about reading the newspaper and see the sensex going up and feel the need to enter or when the market falls they feel it is the right time to exit. Frankly this is the worst strategy. That is why most of us do not make it big in the stock market, we sell the winning stocks early and losing stock late. I have even seen some persons holding on to losing stocks hoping for a resurrection. Also most of us do our investment based on tips of brokers, friends and experts on television. Any free advice is risky, you should do research on stocks and then buy. Remember all stocks do not rise at the same time nor do all stock keep rising through their life.

There would be some persons who did make some extraordinary gains, but not all of us are lucky. But there are some who have taken the pains to research before entering the stock market and these persons have made money. Because these persons have either done the proper research or paid for the research, before investing. They just did not go blindly with the tips. They read when to enter the market and when to come out, they have discipline. They book profits when they need to and hold stock when needed. They just do not go by newspapers and television interviews.

 

Here are some tips to succeed in the stock market

Do a research of the sector and then the stock you want to buy.

• If your research is good, do not worry if the market is up or down, since you have purchased a stock and not the market.
• Start with small investments in a stock and buy with every fall.
• Invest for the long term
• Invest in Large-caps, since there is liquidity in these stocks. If you want to go in for mid-cap or small-cap, ensure your research is through.
• Do not just keep buying, keep a maximum of 10 to 15 stocks, which are from 3 to 5 different sectors and where the stock has strong growth prospects.
• When the fundamentals of the stock deteriorate  ….. exit
• Don’t go for all IPO’s, research before investing.

If you find all this difficult or do not have the time, switch to mutual funds, the fund managers will do all the above for you. For wealth creation, thinking and working long term is most important, do not react to short term market changes. Long term is better from tax angle as well, there is no tax on long term capital gains. Stock market is not a gambling den, if you do look at it as a gambling den, then be ready to lose heavily as well. Look at the stock market as a wealth creation opportunity. Hope these tips help you, all the best.