Investing in stock market is an art. Top 10 important aspects that we should keep in mind while choosing stocks for investment. Always remember this.
- Separation is good:
Generally, retail investors tend to choose a couple of stocks that they like and invest in them. Doing so is risky. Instead, it is better to choose at least five or six sectors and invest in 10 or 12 companies in that sector that are consistently generating income and profits and will continue to be profitable in the future.
At the same time, investing in a large number of stocks to diversify the investment mix (portfolio) is also risky. This means that it is very difficult to observe their activities properly when it comes to high stocks. 15 to 20 stocks are ideal in a stock investment mix.
- Don’t participate in dependent sector:
Generally, if one works in IT sector, we practically see him investing heavily in IT company stocks. Similarly, if a person works in the real estate industry, he tends to invest heavily in real estate stocks. It is important to avoid doing this. This is because any damage in this sector leads to double loss. For example, if there is a problem in the IT sector, there will be a problem for the person working in it. Also, if he has invested in IT stocks, their prices may also fall significantly. Then he will suffer a double loss. Not many people can afford it.
- Continuous investment is essential:
Some invest in the stock market once in a year or once in a new moon. Instead of doing that, it is necessary to invest a certain amount every month. Only by doing so can wealth be created through equity investment in the long run.
- Selection of quality stocks:
Choosing quality stocks is very important. Only then your capital will not contribute. To select quality company stocks, one should analyze the company’s history, past earnings and net profit growth, and future growth expectations.
- Investment mix review:
Long term investment in stock market is always profitable. However, it is important to review your investment mix from time to time. This is because no company stock can be said to be consistently profitable. When there is a big change in the fundamentals of the company it is reflected in the share price. When the company is not likely to perform well in the future, exiting when the stock price is in profit or loss is low can be a wise move.
- No total investment:
Do not invest lump sum in any company stock. In doing so, the profit will be made only if the share price is on the rise. Divide the amount you plan to invest in a company stock into five parts and get into the habit of investing at specific intervals (especially 15 days or 30 days). By doing so, you can buy stocks at low average prices and see good profits in the long run.
- No need to look at the time:
When it comes to stock market investment, investment does not need to look at time period. Any time is a good time to invest. A mistake many people make in the market is to wait to buy a stock until it reaches this price, and wait for it to die when it reaches that price. Also, no one can predict exactly how much a share price will go down. Therefore, it will be profitable to keep the investment amount separate and continue to invest.
- Fundamental and technical study:
Fundamental analysis should be used to select a company stock for investment. Technical analysis is used to determine at what price to buy and at what price to sell a stock. Even if one of the two is avoided, it will be difficult to see profit in stock investment.
- Taking profit outside:
Do not hesitate to take out the profit you see in stock investment. Failure to do so will result in paper profit. As we have already mentioned, if the share price reaches a certain percentage of the expectation, a portion of the shares should be sold and the profit taken. After we sell, if the stock price falls below about 5 percent, we can see a good profit in the long run by buying back at a lower price if necessary and adding it to the investment mix.
- Some money in hand:
Always keep some cash on hand. This is because the price of the stock you are buying and holding can fall anytime. Many a time we have seen the prices of many stocks that are fundamentally strong during an overall market decline. If you have money in hand, you can invest without missing an opportunity.
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