Scam 1992 brought fresh eyeballs to stock market investing in 2020. Everyone suddenly started dreaming of being a big bull after seeing Harshad Mehta’s rags to riches story on screen.
Whatever Harshad Mehta did in his career, some dialogues from the web series made a lasting impact on viewers.
Many with a deep thirst for profits fall into the lure of investing in stock markets. After the premiere of the web series by Sony Liv, many have started posting blindly about the luxurious lifestyle of a stockbroker or investor on Instagram and other social media channels.
‘Risk hai to Ishq hai’ became the motto of many first-time investors who are falling in love with the idea of changing their destiny.
If you have thirst for money, stock market investing can be a great option. But the stock market is not as easy as it seems on screen.
The stock market is not a gambling table that can make you rich overnight.
Investing is a game of patience instead of risking your capital. And the first step to investing in the market is to have a solid foundation.
Thinking to invest in stock market for the first time? We have a few tips and recommendations that would help you build a strong foundation and give you direction.
What's in this blog?
Never Act on Tips & Recommendations
Every morning many news channels bring market pundits live who give market strategies for the day. If you are starting to invest, you should never act on such tips. Be it a news TV expert, a friend or even your advisor, if you don’t have solid ground to check what’s being claimed, better ignore the tip.
Investors lose millions every month because they chose to listen to someone who they haven’t even met before.
If you want to make real money in the market, you need to be practical instead of being a dreamer. Remember, if something sounds too good or too easy, you should get cautious right away.
You should instead learn the fundamentals, do your own research and have a sound understanding before you open a market position.
Don’t invest with borrowed money
This is one of the most common mistakes people make when they start investing. Many people borrow money to respond to a market call in the hope to make profits overnight. The margin option given by brokers is also a good lure to increase profits and many get tempted to use this ‘borrowed’ capital to gain overnight wealth.
Remember, if you use margin or borrowed money to amplify your gains, the same ‘extra’ capital can increase your losses, too.
If you had INR 10,000 to invest yourself and you borrow 10k more from your broker margin or friend, you have a position of 20k and if the stock falls, you will end up losing more amount, part of which you would have to pay back from your own pocket.
Always invest with your own money and take risks which you can afford on your own. Else, you would fell into a vicious circle of greed and debt. The more you’ll be greedy, the more debt you will accumulate leading to increased losses and bad market experience.
Never put all your eggs in one basket
This is a classic advice most first-time investors tend to ignore. Often, they are in the race to find the winning horse and bet all their savings on the winning horse. But just like derby, you can’t predict everything to perfection.
If you have invested just in a single stock or a segment, you have a very small room for error. If you bet on the wrong stock, you’d end up losing a large part of your portfolio.
There’s no point in risking all your eggs in a single basket. The key to growth is diversification. Balance your portfolio based on market trends and your personal financial goals. Even if you are an aggressive investor, there’s no harm in picking up a few risky stocks, but always remember to balance out your risks.
Never Try to Time the Market
People talk a lot about timing the move. But if you’re a beginner, this is something you shouldn’t try. You can’t time the rise, or the dip based on advice given by gurus or studying past trends. Trying to find the best and worst times or days to invest can cost you a lot more than you can think.
If you look at the data for the last 30 years, you’ll realize that the market grows in a linear way. You can’t just jump in and out to take advantage of a single event or a day.
So, rather than just trying to bet like a gambler, you should think of value investing and building a steadily growing portfolio by being consistent.
Don’t Take Emotional Decisions
If you want to survive in the market and really earn money, you’ll have to learn the art of being detached from your investments. You can’t give your emotions the power to affect your investment decisions.
Investment is not about liking a company or having an intuition that something will make you rich, it’s about analysis and practicality.
If you can’t think practically while investing, you will end up making the wrong move at some point in your journey. So, never let your heart rule your investment decisions. Use your brains to check if a position is worth it or not.
You don’t have to be right always. You just have to be there!
The stock market is a way to wealth, but you can’t think of it to be a wish-granting factory. It doesn’t work on your whims and fantasies.
The best thing- you don’t have to be a ‘know-it-all’ player. Most often, you just have to be disciplined in your investment journey. The biggest returns came to those who chose to stay patient instead of those who are in for the small gains.
If you are planning to start investing, remember, you don’t have to be right in all your decisions, you just need to have faith in the market. After all, which instrument can give you consistently growing returns over the last 30 years despite facing multiple recessions, countless scams and whatnot.