The desire of making huge money has always lured investors to the stock market. However, making money in equities is not all that easy. Investing in the stock market requires skills, knowledge, patience and discipline. Apart from these four important factors, you also need to do a great amount of research and hold a sound understanding of the market.
The stock market is the only place which holds the potential to double your money or even more in a few years. For that to happen, you must invest smartly. In this article, we will give a lowdown on some of the money investment tips for making an investment in the stock market. These investment tips will not only help you in taking good investment decisions but also in building a good portfolio of investment.
Stock Market Investment Tips
The stock market investment tips are as follows:
• Keep a Check on Emotions
One of the common mistakes that investors make in the stock market is that they are unable to control their emotions. Often they take decisions on the basis of short term price movements especially during an adverse event. Controlling your emotions in a volatile market will not only help in holding the investments but also in not taking any illogical decisions. Therefore, controlling emotions is an important investment tip because it protects you from selling the shares when the price movement is adverse. Adopting a practical approach in the stock market will help your investments to grow and save you from unnecessary losses.
• Invest After Understanding Fundamentals
One of the important smart investment tips is to invest in the company only after conducting a good analysis. Always remember that you are not just investing in the stock, you are investing in the business model of the company. Before making an investment, always do your research about the fundamentals of the company. You must look at its current valuation, balance sheet, expected future growth, quality of management, P/E multiples, etc. By doing the right analysis, you can find good stocks for long term investment.
Diversification is one of the key investment tips while building a portfolio. The very famous saying, “never put all your eggs in one basket” holds true in the stock market as well. You must never invest all or most of your money in a single stock. Diversification is the best possible way to manage risk in the stock market. You should invest in stocks of different companies in different industries or sectors so that any negative news or event in one industry or sector does not dent the value of your portfolio. Diversification allows you to recover your losses even when one sector or industry underperforms. Therefore, it would not be wrong to say that diversification of the portfolio is one of the most important things to do while building a portfolio for the long term.
• Know Your Risk Appetite
The next investment tip while making an investment in the stock market is to understand your risk tolerance. It is a known fact that the stock market is subject to certain risks and you must be prepared to take them because the percentage of returns that can be made here are unmatched. Managing and knowing the risk in the stock market is essential because it is a volatile place and you must stay firm during times of panic or adverse events. You will be able to better manage your risks if you stay cool during the times of financial uncertainty and take decisions analytically.
• Avoid Leverage
Another important investment tip is to avoid leverage to execute your stock market strategy. Leverage means borrowed money and it should never be used to trade or invest in the stock market. Trading or investment done with leveraged money looks great when the stock goes up or you make a profit but it can prove to be fatal when the situation is opposite. When you borrow the money, you have to pay the interest along with the principal amount. In addition, if you make losses, the liability further increases. Therefore, if you are looking to invest for the long term, smart investment tip would be to avoid leverage.
The above-mentioned share market investment tips will help you in investing money for the long term. These tried-and-true investment tips can help you boost your chances for long-term success.
Apart from the above tips, there are a few more things that you as a trader or investor in the stock market should take care of. These are:
• It is very important to make informed decisions before investing in any stock. Do proper research about the company, its management, past revenues, future prospects, etc. Conducting sufficient due-diligence before investing will help you better understand the future.
• Another important thing is to educate yourself about the stock market. Learn about the different kinds of trading strategies, risks involved, market movements, trends, how to read charts among other things. Once you know the basics of the stock market, you will be in a better position to take investment decisions.
• Never be greedy with your expectations. Don’t expect the market to always work in your favour. The stock market is unpredictable and highly volatile. So, determine your entry and exit points before investing. It is also advisable to put a stop loss in place which can help you avoid unnecessary losses.
• Avoid herd mentality in the stock market. Meaning, don’t be influenced by the actions of others. If everybody around you is investing in a particular stock, it is not necessary that you also follow the same. Invest only if you are convinced that the company you are investing in is good and will fetch you returns.
• It is important to regularly monitor your portfolio. Since the stock market is highly volatile, any news or major economic event can impact the prices of your shares. If you cannot personally review your portfolio due to time constraint or lack of knowledge, you may seek help from professionals.
If you require more money investment tips or smart investment tips, you may contact a reputed broker like IndiaNivesh Ltd. With our years of experience in the financial market, you will certainly get many share market investment tips that can help you in building a diversified portfolio.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Bond Market in India - Meaning, Types & How to Invest in Bonds
Bond market in India Investments are classified in two types to put it simply: • Fixed return investments• Variable return investments Investments with a fixed return provide a guaranteed return in exchange for the capital invested. These investments generally have a lock in period with low liquidity. Variable return investments are subject to market forces where the exact return on the investment is not guaranteed till the time the investor exits from the investment. Equities, mutual funds, gold, real estate are variable return investments. One of the most popular types of fixed return investments are investment bonds. What are bonds? Bonds are instruments issued by a borrower to raise capital from investors or the public at large. Bonds are like loans which mature on a fixed date. In return, the borrower pays interest. Depending on the terms and conditions of the bond, the interest can be paid either at specified intervals or on maturity (deep discount bond) What are the different types of bonds? Bonds in India are generally issued by Government bodies. Having a government backing to the bonds provides security to the investor that these bonds will be repaid on maturity. However, other private institutions also issue bonds depending on their need. These are the different types of bonds available for investment in India: 1. Central Government bonds:These bonds are issued by the Central Government to raise funds. These bonds are issued by the RBI on behalf of the Government. The primary purpose of these bonds is to finance fiscal deficit and meet the shortfall of revenue in the Government budget. These bonds are the safest bonds to invest in, since they are backed by the Government and will be repaid on maturity. 2. State Government bonds:These bonds are issued by the State Government to meet their fiscal deficits. These bonds are listed on the stock exchange. These bonds are also backed by the Government, making them low risk investments. 3. Municipal and Local authority bonds:A municipal corporation or a local authority may raise finance to meet funding for specific goals such as constructing infrastructure, public water works etc. These bonds are also rated by credit rating agencies and it is best to go by the rating and past records before investing. 4. Corporate bonds:These are highly risky bonds since the maturity depends on the track record of the company. Before investing in such bonds, you must do a complete study into the company and its performance. 5. Public Sector bonds:These bonds are issued by highly rated public sector companies for meeting their growth and expansion needs. These bonds are relatively less risky since PSUs are under the Government. Generally, these bonds are issued by companies where the Central Government is the majority shareholder. 6. Tax free bonds:Companies such as the National Highways Association of India (NHAI), Indian Railways Finance Corporation, HUDCO, Rural Electrification Corporation (REC) issue these bonds. The interest earned on these bonds is completely tax free in the hands of the investor. Types of bond markets: 1. Primary market:This is the market where the borrower approaches investors to raise capital. The issue price of the bonds and the coupon rate is fixed at the time of raising capital. 2. Secondary market:Most of the bonds are traded in the stock market. They can be sold depending on when the investor wishes to exit from the bond. However, it is to be noted that the price for the bonds depends on how close the bond is to interest payment. As the bond nears the interest payment date, the price goes up. The price and coupon rate of the bond move inversely i.e if the price goes up, the interest rate goes down. This is because the net return to the investor stays the same as when the bond was issued in the primary market. For example, if the bond is issued at Rs. 1,000 with a coupon rate of 8%, the interest will be Rs. 80. However, if the price goes up to Rs. 1,250, the interest rate goes down to 6.4%. However, the interest payment to the investor remains the same. How to invest in bonds: It is possible to invest in bonds in India using your demat account. Since these bonds open for subscription in the primary market, it is possible to apply for them online. If you do your trades through an offline broker, it is possible to fill up a form and submit it offline to your broker as well. The application will then be submitted into the issue. Once the allotments are made, you will come to know how many bonds you are allotted. The process is similar to equity shares. Bonds have a minimum issue price and you can invest in bonds in India in multiples of the specified number. For example, a corporate bond may have an issue price of Rs. 1,000 and can be purchased in multiples of 5. This means the minimum issue is for 5 x Rs. 1,000 or Rs. 5,000. Further investments can be made in multiples of 5 i.e 10,20,35 etc. Investing in the primary market is extremely simple and can also be done wholly online through the demat account. It is also possible to exit your bond investment online as well since these bonds are traded in the market. Bonds in India are listed on the stock exchange. Even though the price discovery for bonds is restricted, it offers low liquidity, which means the investor can exit these bonds ahead of their maturity should he wish. Generally, the price of bonds goes up as it nears the coupon payment date. The ideal exit strategy would be to sell bonds as it comes close to the interest payment date to get more than the payment price. However, in case of deep discount bonds, the funds may be locked in till maturity depending on terms and conditions of the bond. A deep discount bond is a bond where no interest is paid but a higher amount is paid on maturity. For example, a deep discount bond may be issued for Rs. 20,000 and maturity price may be Rs. 95,000 after 10 years. No interest will be paid in these 10 years and the maturity amount will directly be credited to the investor’s account on maturity. Deep discount bonds are available for investment through the demat account or through a broker. Another way to invest in bonds indirectly is to purchase debt mutual funds that primarily invest in bonds. These can be found out by analyzing the portfolio of the respective mutual funds. The bond market in India does not have many players. It is dominated by Government bonds and entities. This provides safety and security of capital. The bond market however is very nascent and still growing. With increasing investor interest, bonds in India can turn out to be a fast growing market. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Forex Trading: A Beginner’s Guide for 2019
Trading in foreign currency is very easy and convenient in today’s time. Its popularity can be seen from the fact that forex trading has become a source of regular income for many people. However, forex trading for beginners can be tricky as they do not have sufficient experience of how does forex trading work. To assist the beginners, this article will highlight the basics of the forex trading, forex trading strategies, forex trading tips and much more. Firstly, let us understand the meaning of forex.Meaning of ForexForex, also termed as foreign exchange is a market place where currencies of various countries are traded. Currency trading takes place in pairs and the currency pair movement determines the value of one currency against another. For example, INR/USD currency pair measures the value of the Indian Rupee against the US Dollar. The first currency of the currency pair is termed as the “base currency” and the second currency is termed as the “quote currency”. After understanding the meaning of Forex, let us now learn about how does forex trading work.How Does Forex Trading WorkWhen you start trading in foreign currency, you will notice that “Bid” and “Ask” prices are quoted. The price at which you can buy the currency is called the bid price and the price at which you can sell it is called the ask price. In foreign currency trading, you can take two types of trade; long trade and short trade.• Long TradeWhen you purchase currency in the trade, you expect the currency pair to increase in its value so that you can make the profit by selling it at a higher price. This is known as a long trade. • Short TradeWhen you sell currency in the trade, you expect the currency pair to decline in its value so that you can make the profit by selling it at a lower price. This is known as a short trade.Let us now understand how to start forex trading.How to Start Forex TradingTo start forex trading, you must open an account with a registered broker like IndiaNivesh Ltd. Only with the help of a trading account, you can take the long and short trades. In order to open a trading account, you will need basic documents like account opening form, address proof, identity proof, income proof, passport size photograph, cancelled cheque or bank statement, PAN card, etc.Since you now know about how to start trading in forex, it is important that you know about the right strategies also. Let us learn about forex trading strategies.Forex Trading StrategiesForex trading for beginners can be fruitful if they follow certain trading strategies. The trading strategies can help the beginner to make good returns. Some of the trading strategies are as follows:• Day Trading StrategyAs the name suggests, the day trading strategy is meant for the same day trading. In this strategy, you will have to exit the trade before the end of the day (trading session). The main advantage of this trading strategy is that you are protected against adverse events that may happen overnight when the forex market is closed. • Swing TradingSwing trading involves making short term profits on the trade by holding the position for a few days. Monitoring the price movement on the bars after every half an hour or hour is helpful in this strategy. • ScalpingScalping is a trading strategy that uses tick charts. This trading strategy involves quick trades that last for just a few minutes. One can make profits in this strategy by playing for a few points by quickly beating the bid/offer spread. • Positional TradingPositional trading strategy involves maximising profits from a major shift in the price. This trading strategy requires a good amount of patience, discipline and knowledge about the market fundamentals.After learning about forex trading strategies, let us learn some quick tips that can prove to be very helpful in forex trading for beginners.Forex Trading Tips• Before taking a trade, always understand the trend of the market. • Avoid taking a trade against the market trend.• Preserving capital is most important in forex trading. So stay focused and trade only when the opportunity for you arises in the market.• Try to avoid trading in a foreign currency using borrowed money.• Do not take a trade without putting a stop loss in place. • Emotions have no place in forex trading.• Always choose a methodology while trading and stay consistent with that. • Always know your entry and exit points when you go long or short.• Avoid being greedy in forex trading. Timely booking profits will help your capital to grow at a rapid pace. The above mentioned forex trading tips shall help the beginners to become successful in the market. To encourage forex trading for beginners, we list down certain advantages of forex trading.Advantages of Forex Trading• It is a highly liquid market.• It allows a wide range of currency pairs to be traded.• Forex is a good hedging tool.• Large profits can be made from the volatility in the forex market.• It provides easy to enter and exit positions.If you are a beginner in the forex market, IndiaNivesh Ltd. holds the expertise to guide you on the various topics regarding forex trading for beginners. You may get in touch with us to know how to start forex trading and much more. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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