By Shweta Khanna Bhandral
The idea of investing in Stocks market has never had many takers in our country because we are primarily a society that believes in saving. Yet over the years minds have opened and the younger generation is buying into the idea. Today individual investors account for about 38 per cent of equity market volumes, and the number of new registrations on NSE has gone up from 17 lakh in FY09 to 28 lakh new investors in FY19.
I am a long-term investor in the Stock Market. I believe you are ready to invest in the markets when you want your money to grow. Yet, putting a part of your savings in direct equity calls it becomes important to ask some important questions for to yourself. Here are 5 simple questions financial experts say to ask yourself when investing in stocks market. I would suggest, write the answers down in a diary.
1. How much do you know the markets?
2. Do you have the time to manage it yourself?
3. How much do you want to invest, and how?
4. What is your goal?
5. What is your risk appetite?
Personal finance expert Hemant Rustagi says “Investing in stocks market can be a great option to generate higher returns for those investors who are well-versed with the nuances of investing in it ”By this, he means that you, as an investor, should be an avid reader of businesses and news that impact the markets. You, as an investor, should also understand the management, product, future promise of the company that you choose.
Analyzing the impact of various domestic and international factors on the stocks is also essential. Your portfolio cannot be foolproof, but you must make your decisions based on facts. Now let’s talk about mindset; do you have the courage to book losses if an investment or two do not work out well? Besides, one must clearly understand the risk-reward ratio of investing in the stock market. It will ensure that there are no gaps between expectations and realities. Hemant cautions us when he says, “Market volatility is a natural phenomenon and will always remain an integral part of stock market investing. However, many investors do not have the temperament and the skills to handle ups and downs in the market”
To minimize the impact of volatility on one’s portfolio, you must think long term. Your goals and investment leading to them should also be long term. That’s how you will get desired returns over the years. A disciplined approach takes away the speculative element from the investment strategy. For example, if one invests in equity as a part of one’s retirement planning, there is no need to bother about the movements in the stock prices daily. The focus should be on the quality of the portfolio and the right mix of asset classes.
If you are interested investing in stocks market and making your money grow , I say you better do it yourself. Learn, finance, and earn; it will keep you confident and satisfied. It is not difficult with de-mat accounts, after all.
The most common rule of investment is – do not put all your eggs in one basket. Which means, divide your money into various asset classes. What are the asset classes? Debt, i.e. FD, RD, PPF, EPF, are your most common debt investments. Mutual funds have all the categories debt, equity, balanced, hybrid. Real Estate could be good but depends on where and when you are investing money. Gold is another good asset class and Stock Markets or Direct Equity. You must sit, think, and allocate your savings to each of these assets. You need not invest in all of them; you can pick up two or three asset classes, but this decision should as per your needs and goals.
Lastly, do not invest based on rumor, if you need professional advice, seek one. It always helps to sit with an expert and understand your finances.
