Important Stock Investment Lessons to Learn

Investing is a smart way to maximize your earnings. According to CEIC data, in 2021, investments accounted for 21.8% of Indian GDP. Due to its long-term benefits and the potential to provide a steady stream of income, many consider it as an attractive option for young investors. You can invest in any industry but, the golden rule is always the same – analyze performance before investing.

That being said, there are multiple ways of investing money. This includes both secured strategies and unconventional strategies. You may be someone who likes to take risks or someone who always plays on safe ground. Whichever category you fall into, it is crucial to expand your knowledge and try out new things in the stock market. To lend a hand, this article will help you understand the important lessons to learn in stock investment.

What kind of investor are you?

Many aspire to become the next Druckenmiller or Warren Buffet. But this involves a history of hard work and mental flexibility. Any good investors need to master 4 basic grounds – independent thinking, unparallel competitiveness, tireless inquisitiveness, and self-awareness. Before you start your brokerage account, you also need to understand what kind of investment tactics you may employ. Are you an active participant who consistently gets your hand dirty, or are you someone who does it and forgets it? Depending upon this, you can employ a variety of methods to reach your desired goal. Key investors make their decisions based on the change waves in macroeconomics and market conditions. They are fearless to take risks and welcome losses with an open heart.

Online brokers

Brokers are the people who represent clients on the stock exchange floor. All stockbrokers in India are accustomed to the regulations set by the SEBI or Securities and Exchange Floor of India. If you are new to brokers, then take a look at the following functions of online brokers;

• Brokers order trade executions for their clients
• Brokers offer trading platforms to execute your order easily
• You can get financial advisory services before you initiate actions
• If you own large brokerage funds, then you can margin financing

Full-service brokers

Brokers can be divided into two categories – full-service or discount. Full-service brokers facilitate full-time brokerage facilities and fiscal consultancy about retirement savings, healthcare and all other spendings. As they generally deal with conventional brokerage, you can approach them if you are planning to invest in large amounts. Because of this, they charge more than discount brokers, which may be a percentage of your assets. In India, it varies between brokers; however, usually, they charge between 0.3% and 0.5%. They also support you with educational materials and provide market data and figures.

Discount brokers

Discount brokers are getting popular because of their tech-savvy attitude towards and efficient consultant services. They will introduce you to tools to manage your stock investments and even facilitate Robo-advisory standards to make you completely worry less about your investment handlings. They make investment easy and bring convenient options like mobile applications to keep track of your money. As the service packages of discount brokers are less, compared to full-service brokers, they sometimes only charge 10% of your transaction.

Robo-advisors

These are automated digital platforms that offer financial investment services. Robo-advisors are still new to the stock market and are the end product of tech invasion. They employ various technologies and algorithms to deliver attractive results. All their projections and consultancies are based on these computerized results and have little space for human-intensive supervisions. Once you give them your goals and financial situations, using advanced tech infrastructure, they figure out your interested areas and provide investment advice adhering to the results. These are best for long-term investors, as they can easily track company performance when the selling time frame is long. They are cheaper than other brokers and charge 0.2% to 0.5% of your total transaction. The only negative side of Robo-advisors is that the investment options will be limited in comparison, as it is more oriented towards mutual funds.

Apart from this, now let us take a look at some vital things to remember while investing in the stock market;

1. Search for facets impacting company stock value

Before you choose a company and decide to try your luck, it is necessary to measure the depth you are jumping into. There are multiple factors that will influence the stock price of a company. Change in these factors may increase or decrease its future value. Many analysts are still unaware of this nitty-gritty that makes stock prices high or low. Thus, study your locale well and track the fundamentals that directly correlate to stock price before you start investing.

2. Avoid leverage

Make sure you invest your extra money or what you consider as excess money. Leverages are borrowed money available to execute stock market strategies. Many people leverage money from banks hoping they could double the amount by investing. Unarguably there is a positive side to it. You can lend money from banks which will be credited to your marginal account. But imagine experiencing loss? It will become a liability as you will lose all the money that you have invested at the same time you need to pay your broker. Once you achieve a flair in investing, then you can move to such risky options.

3. Think twice about diversification

Diversification gives you the benefit of a middle ground. It will secure your position and reduce risks to some extent. A diversified portfolio is good if you incur unexpected losses. But avoid overdiversification. Many famous investors are against diversification and try to concentrate on a few stocks that have the potential to bring money. If you are bombarding money in different stocks, it will impact your growth and bring you limited profit.

4. Have realistic expectations

The stock market is not a money lending machine. It doesn’t make you a billionaire overnight. All those who benefited from the field had employed stringent discipline methods and suffered losses before starting earning. Many think that putting some money in some common names is enough to make use of the market. But our experience tells us you need a holistic strategy to bring sustainable results. Following the mob is not always good and can even limit your profit. So, the best way to start buying stocks is by approaching a catalyst who can give you advice regarding the current and future markets.

As we have seen, managing the stocks all by yourself and keeping track can be daunting for many. Apart from this, before deciding where to invest, you can approach a professional consultancy service that can supply you with tools and ways to boost your profit. If you are looking for an efficient and experienced broker service, then Gotaxfile can help you will all the basic facts you need to know. We are a trusted advisor with a vast wealth of experience and help you comply with all the rules and regulations set by the government. Contact us to know more!