How can you earn money from Indian share market?

Many people start stock trading to make good money. However equity trading is not easy for all, despite it, many investors have made a good profit in stock trading. There are some basic principles of trading like one must have discipline, patience, market understanding and research ability.

Indian share market

Indian stock market is quite volatile. This creates confusion among investors regarding their decision to hold or sell stocks. Therefore, there is no tested or proved the formula that can help to achieve desirable success in the share market. However, there are some trading rules that can help to increase chances of success during trading.

1. Follow disciplined approach 

If you study the history of the Indian stock market then will find one thing that whenever the stock market goes up suddenly it creates some panic moments for investors. A big number of investors had lost their money when the Indian stock market had a bullish trend. It happened due to the volatile nature of the stock market. On the other hand, some investors who had followed a disciplined approach earned good money. Therefore if you have a long-term trading plan then should use a systematic disciplined approach.

2. Control your emotions

There are numerous investors who have lost their money because they did not control emotions during share trading. Investors invest in share market to make good profit and greed of this they invest in wrong shares. Greed and fear are two factors associated with emotions and these must be controlled during stock trading.

3. Trade with surplus funds

Some investors take the loan and invest in the stock market in the belief that it will return good money that is wrong. The stock market is full pack with up and down. You should not test your skills or luck with debt money. If you are a newcomer in the stock market then it is advised that you should use your surplus money for trading. If you start making the profit then use the same amount to buy other shares.

4. Set realistic goals

Most of the investors set earning goals for invested money. You also can set financial or profit goals during trading but it must be realistic. There is no guarantee that you will get the same return each time. Therefore you must set achievable and realistic financial goals.

5. Avoid herd mentality

Many traders follow herd mentality means they buy or sell a specific share if most of the traders are buying or selling. In such way, they try to go behind majority without their own research. You should avoid such mentality because it will not work in long run. You should do your own research and follow self-trading strategies.

The stock market is one of the best ways to get the good return of invested money but here also you will have to follow some basic rules. If you follow these then can stay in the stock market for a long time because profit and loss are two faces of trading in the Indian share market.

Many investors have been made the good profit, you also can but will have to keep patience and avoid greed during trading.

Share market investment tips for early-stage investors

These days each and every one wants to become rich as quick as possible. To search such ways, some people buy lottery tickets while some move towards share market investment. There are a big number of people who thing investment in stock market is the easiest and quick way to become rich. However, it is not true for all if you don’t follow some basic rules of the investment in the share market. Some early-stage investors also rely upon luck when they don’t have basic investing knowledge.

investment tips

Here are some common investment tips that early stage investors should follow:

1. Go for long-term aims

First of all, you should ask yourself what is the aim of investment in the share market. Do you need investing money back in the next 3 months, 6 months or a year? Are you investing for future expenses like buying a home, car or bear college expenses etc.?

Before investing in the share market, you must have a clear purpose of the investment. If you are expecting a huge profit in a short period of time then you must rethink about investment in the share market. Due to the volatility of the share market, it may not return desirable return in short time. You will have to go for long-term aims.

2. Diversify investment in share market

The most popular method to manage investment risk is diversifying investment. The most popular thought about investment is “Don’t put all eggs in one basket”. It is really true in the share market. You should buy stocks of different companies which deal in different industries. If any bad news or event hit the companies of the specific industry then investment in other industries may help to recover from the loss. All experienced investors make their investment portfolio with the share of different companies belong to varies industries.

3. Controls on emotions

To control emotions during stock trading is the key to make the profit in share trading. Most of the early stage traders and beginners fail to control their emotions especially when they suffer from the loss. Sometimes, fluctuation in the share of a particular company or companies of the specific industry may be due to rumors, market news, government’s new policy or rules and investors’ hopes along with emotions. So, you should not flow in emotions like others and make a decision on the basis of the company’s prospects, management, and assets.

4. Understanding of your risk tolerance ability

Risk tolerance varies person to person and is a psychological trait. It is based on different parameters like age, education, lifestyle, income etc. Risk is an important element of the stock trading and both early-stage investors and experienced have to face it. You must have risk tolerance ability if you are planning to invest in share market for long time. Stock trading is not free from risk, so you must be familiar with your own risk tolerance ability. However with understating of your risk tolerance capacity, you will avoid to invest in those companies which can make you anxious.

If you follow the above-mentioned tips then you can become a successful early-stage investor.

How Do You Invest in Stocks for the First Time?

You finished your academics, and now having a comfortable but struggling job, and have little extra funds and are planning to save for your car or a home or started building for an adequate retirement fund.

How Do You Invest in Stocks for the First Time

When looking for investments for your dream car or house or anything, one has too many options and young people often get confused, where to begin and how to begin, because some investments are often too complex and difficult to understand.

If you have decided to invest in stock market, there are certain things that you should keep in mind

 

  1. Learn about investing

To learn more and more about investing best friend is reading and knowledge gaining. There are numerous books, magazines, periodicals which are focused on the share market. There are books available written by distinguished authors. Articles also appear in business newspapers and magazines.

You can also ask for advice from successful traders. Their view, opinion, their calculations, and observations. Gaining knowledge is the best form of protecting your hard earned money. There are benefits of intraday trading.

 

  1. Opening account with established brokerage firm

Open trading and demat account with brokerage firms which have vast experience. They offer trading tools like candlestick analysis, stock screeners etc. so that you can filter out good stocks form not well-performing stocks. The fundamental and technical analysis also helps you in segregating good, better and best stocks. Brokers get company news much before it spreads inthe market, which gives you an added advantage. Better take an overview of Indian stock market before opening an account.

 

  1. Control your emotions

One should think of gain/loss in stocks from a logical point of view and not from an emotional point. It is your business and should be respected and treated as one, emotions should be kept on the backburner. There are many traders who cannot control greed. They expect that the share prices, which they hold, to keep on rising forever which in reality is impossible. One should not stick unnecessarily to shares which are non or underperforming. You can make money in Indian stock market provided you “play” with brain and not the heart.

 

  1. Certified financial planner

Do not take your investments decisions from any Tom Dick and Harry. They can be anyone who has the least knowledge about share market dynamics. They can be your friends, family member or anyone. Remember it is your hard earned money and you cannot afford it to jeopardize your investment plan. And later tell you “I told you . . . . “  and wash his hands off. Better take help of a certified financial planner, who knows when to enter and exit the market. Which shares to hold, which to buy, which to sell depending on market conditions? You can also join best share market training institute and gain knowledge.

 

  1. Investment amount

This is one of the most important decisions to take. How much amount one is having as surplus and how much to invest? You should keep a certain amount for unforeseen future needs. If you don’t plan properly then when some funds are needed for the emergency purpose, you may have to sell shares, for a loss, if the market is in correction mode at that time, and you intended to hold it for a longer period. Stock market investment tips can be had from reputed and registered firms with SEBI on the official website.

Is it profitable to invest in shares?

Just like any other market, say a vegetable market or fruit market, a financial market is a place where buyer and seller meet to enter into a securities transaction. The place where this exchange of share takes place is called stock exchange.

There are many stock exchanges in the world. They are located in the major financial center in the world. Like New York, London, Tokyo, Shanghai, Mumbai, Hong Kong, etc. Companies have to list themselves on the stock exchange so that their shares can be traded. Also, see an overview of Indian stock market for a better idea.

Is it profitable to invest in shares

 

Shares are bought/sold through firms who are called stock brokers. These stock brokers charge a fee for the services that they give. They are full-service brokers and discount brokers.

  1. Variety of stocks

One can invest in the stock market by either selling/purchasing by oneself (benefits of intraday trading) or by investing in mutual funds (or fund company). By investing through oneself, one has to pay only brokerage charges. By investing in the mutual fund, charges for managing fund are automatically deducted.

By investing through the mutual fund (MF) the fund manager invests in a number of stocks on your behalf, diversifying in different equities so as to reduce the risk, better return on investment and keeping day to day watch on the market.

  1. Investment companies

The risk is always involved while investing. Be it banks, equity or whatever. Though the degree varies and so do the returns. Investors should balance risk and rewards before investment. Here your risk-taking capabilities come into play. Some investors are risk lovers and some are risk averse. One should know when to sell shares to make a profit.

Hence it is critical to choose the right company to invest in. To reduce risk, one should select such a company that has good cash flow, good saleable product range (present and future) and has large enough market capitalization (mostly blue chips and mid-caps), good and proven management (board of directors).

If you are investing in equity through mutual fund route, see to it which sectors they are investing in. Broader the sectors better but not too broad. As broader sector tend to be less volatile in terms of returns.

  1. Mix portfolio

Equity investments have the tax advantage as there is no capital gain tax if equity is held for more than one year and dividends are taxed at a much lower rate as compared to interest income. Dividends are not too regular as interest. Hence one should have an investment which is a mix of equities and fixed income.

Depending on your risk tolerance factor (both emotionally and financially) one should choose accordingly. If you are a risk lover than you can have more of equities and less of interest income component. And if you are risk averse the opposite is true.

  1. Time period of investment

As far as equity investments are concerned, to get better returns one has to stay invested for a considerable period of time to get better returns and one has to make certain adjustments depending on market conditions as and when needed. No need to time the market when they are high or low, that is how to make money in Indian stock market.

From available data, one can see that for long-term investments, the equity market has given better returns compared to interest paying investments. Bank interests are unable to beat inflation as everybody knows inflation rate is moving more ahead of interest rates year on year basis. There are many myths and facts about Indian stock market which should be cleared before investing.

Why should you diversify your share portfolio?

Dictionary meaning of diversification is – having variety of character or form or components; or having increased variety

It is a familiar term for many investors. In a nut shell “Do not put all eggs in one basket”. An investor diversifies his portfolio as a vital part of financial planning and also to maximize return on capital. One can diversify his investments into different shares or different asset classes like real estate, bonds, gold, bank deposits etc. When one asset class fails to give proper returns it is balanced by another asset class. For example, when stocks are moving down gold moves up and vice versa.

diversify investment portfolio

We will see the advantage of diversification and how we can profit by diversifying our capital and minimizing (containing) our risk.

  1. Economic crises – Portfolio diversification can prevent you against the risk of economic crises (mostly during external aggression or war). When financial market crashes (Lehman Brothers) suddenly assets like gold are seen as safe heaven to park your investments. And when the bull market is on run assets like stocks give a good return on your investments as compared to gold. So if you have diversified into gold and shares your loss in one asset class is covered up by another asset class. Diversification can be used as a safety net.
  2. Tax advantage – It is a great way to save taxes on profit earned. Investment in stock for more than one year is not taxed. Similarly, there are tax saving mutual funds (3 years lock-in period). Also, deposits in PPF (deposit, accrued interest, and withdrawal, 15 year period) are also tax-free to the certain extent. So diversifying your portfolio into stocks, mutual fund, and PPF (and many other) you can save on tax from your investments.
  3. Sectorial advantage – When the government announced schemes/policy like home for all, affordable housing, decrease in housing loan interest rates, etc construction sector will get the boost. As part of a diversified portfolio if you have shares of companies dealing in construction and allied field you will get good returns on investments. Trump’s announcement gave the boost to American IT sector companies and demoralized Indian IT sector. How to make money in Indian stock market and in which sectors to invest in so as to diversify your risk to the minimum.

You can diversify your share portfolio across various sectors like banks, cement, automobiles, pharma, telecom, energy, IT, FMCG, consumer goods, metals, media, and entertainment etc, and also across large, mid. small micro and mini caps, that is market capitalization. See Indian stock market overview for more sectorial details.

  1. Overexposure – One should not be overexposed to one sector or asset class. Say you keep on regularly buying shares of one company says ABC which is in pharmaceutical sector deriving most of its revenue from the USA. Now USA changes its policy and ABC cannot sell to the USA and suffers the huge loss. Since you have been accumulating shares of ABC for a long time your return on investment wipes out. There are many myths about Indian stock market which should be dispelled among the general public. Across asset class, those who have invested their lifelong income only into reality, because of demonetization, RERA, other policy have suffered a huge loss on their returns. Had the investor diversified into shares, gold, bank deposits etc. he would have lessened the loss on return. One should know when to sell shares to make profit.

Purpose of diversification is to minimize risk and provide meaningful gain, so as the financial goals are achieved and can have a comfortable retirement and a life one dreams of.