How an Experienced Investor Invests in Stock Market
If you do invest directly on your own in shares using online trading app, your two most important observations should be ensuring that you have a different set of stocks i.e. diversified selection of shares across the Indian stock market. The distribution is done to reduce risk, and regularly adjust investment to rebalance your portfolio. When a share of a company rises in price, you should seek options to selling some high value stocks, but not all, of them, so that you make a profit, but your healthy portfolio remains proportionally strong as it was when you started initially. By doing this flexibility in tuning investments, you’ll be able to make more profits if the share price continues to rise giving you further earnings.
Managing Complex Investments
If an investment product of stock market is incomprehensibly complicated, it is highly advised to avoid it. It does not mean that you are beginner so you are taking safe route but it simply means that the company is not transparent and/or your financial adviser is trying to confuse you so that he can make more profits in commission without predicting to you actual value of the stocks in due course of time.
Irrespective of complications, it is recommended to always analyse the stocks in terms of their historical value and technical input. There are various tools to do analysis that give your reading output in the form of chart pattern and technical indicators.
Some stocks are prohibitively overpriced. You should ask your broker to give you a detailed breakdown of your investment in three ways: as a percentage of your investment; as an expected valuation over a period of time; as a sell option to reduce loss in case of crisis; and as the difference in the amount by which the costs will reduce your investment at buying or selling transaction. Be very careful and keep track on your investments, discussing with stock broker.
Commissions and consultancy fees add to overheads. Use brokerage calculator to know fees you have to incur for availing broking services. Brokers get commission whether you buy or sell, they earn in your transactions. Most are good but few are exceptions who only worry about making commissions. Always cross verify how much commission is being paid by you, is it less compared to other brokerage firms. Apart from stocks, some financial products – particularly those offered in the form of linked investment product providers do give high margin to financial advisors – they promise low risk high return but is actually minting money for such advisors. Completely avoid them. Do not invest into investment products that make loss for you and give higher commission margin to financial advisors. High commissions often is a perverse incentive for many advisors to miss-sell. Beware of this fact. Control your overheads by spending less in brokerage and advisor fees.
Fundamental types of stocks are based on the structure. Stocks are sorted by structural formats of organisation size, industry, sector, geographic area and capitalisation. This is why you should know about the various types of stocks.
A stock offering a range of underlying information that shows the company growth in terms of consistency and expansion overrule size and geo-location. Profit making aspect become prime validation for investing in stocks. Keep 20% of your investment in safe stocks. Bonds are offered by big organisation. They are considered to be better than stocks. In some cases, they are referred as stocks but feature wise bonds are actually loans that you lend to a company or a government. Bonds in general are less unstable and safer than stocks, when held for longer period can offer more steady and reliable returns.