It can be tempting for novice investors to get a piece of the stock Exchange values. Other people’s earnings stories may make you wonder why you keep your money in a safe.
But, before you invest, the first question to ask yourself is how would you feel if you initially lost money? Do you know that investing in stocks can be risky? It occurs especially when the indices of the National Stock Exchange (NSE) they are close to their highest levels of all time.
Experts advise first-time investors to enter the stock market through mutual funds. It may not be a rational decision to jump into the stock market without knowledge. Initially, you should invest most of your equity capital in mutual funds.
The stock market is not a route to quick wealth. If you ignore this fact, you will soon suffer. You may get lucky on your first investment. But then, you can buy something that will continue to sink.
Try to learn the tricks of the trade from an unbiased source. Today, many brokerage firms run short-term learning programs on stock investing. These will let you know what stock trading is and why. Sensex and Nifty go up and down.
Large-cap stocks are better options to start with. These stocks are less volatile than mid- and small-cap stocks. The information available for large caps minimizes the likelihood of unpleasant surprises.
If a stock’s key factors are still strong but its price has fallen, you should buy more. Otherwise, you must sell.
You should stick to simple businesses whose operation can be easily understood. Experts advise opting for those companies whose products will not become obsolete in the future.
You can buy and hold the shares of such companies that enjoy sustainable competitive advantages. Analyzing the events of the past three to four years will help you understand the growth pattern of a company.
Many companies become overburdened when the economy expands. Do not invest in such companies. You need to look at the debt-equity ratio and the interest coverage ratio to understand the degree of leverage a company can enjoy.
A new investor should always keep in mind not to trade the market when the Sensex is at a high level and valuations have already been stretched. First-time investors should also avoid initial public offerings (IPOs).
If you start to understand the fundamentals of trading in the National Stock Exchange, this too can be a rewarding commitment. Make sure you are following the pros and cons mentioned in this article.