If you are new to the stock market, make sure that every step you take is well thought of and organised. To help you begin your stock market journey, we have created a list of some essential dos and don’ts.
The Indian stock market has been performing impressively since the last few years. The impressive rise of the indexes in the country has encouraged a lot of new investors to be part of India’s growth and generate handsome returns in the process. But while things might appear easy from the outside, it can be very challenging and confusing once you’ve created a demat account and ready to trade.
If you are new to the stock market, here is a list of some essential dos and don’ts that can help protect you from losses.
Diversification is the Key
While this point is no secret, most of the new investors often forget this simple rule. Rather than investing all your money in a single stock or sector, spread your investment in multiple stocks and sectors. This will ensure that you don’t lose a lot of money when a particular sector starts moving in red.
Sell the Non-performing Stocks
Another common mistake among new investors is holding a stock for a period longer than they actually should. If a particular stock is not performing as per your expectation, it is better to sell it off and invest the money in something better. Even if you’ll lose some money if you sell the stocks now, it is still a smart option as the losses might only increase in future. You might again invest in the same stock once it starts recovering.
Take Calculative Risks
Your investment in the stock market always carries a certain amount of risk. While you cannot eliminate the risk entirely, you can at least take calculative risks to avoid significant losses. Spend some time in learning the things that you should check in a company before investing and start small.
Do not Invest a Lot of Money when you are New
Even if you are pretty sure about a stock’s performance, avoid investing a lot of money in it, especially when you are new to the market. While a share might have had a dream run in the past year or the past couple of months, there is no saying whether the rally would continue in future too.
Avoid Future and Options in the Beginning
Prefer cash markets over fancy offerings like future and options. While these investments appear to have great potential, they do carry massive amounts of risk too. Stick with the cash market in the initial days and only try F&O once you have adequate experience and know how these investments and their contracts work.
Do not Follow the Herd
While it is good to listen to an experienced investor, do not rely on your relatives or friends for recommendations. Only trust yourself and your research if you want to invest in Sensex. Educate yourself and expand your knowledge base to invest and trade confidently.
Being a successful investor is a long journey, and unfortunately, no quick fix can help you earn massive returns in a short span of time. Stay away from investments that sound too good to be true and focus on learning to be a savvy and successful investor.