shares main nivesh kaise karen | Benefits of investment in shares: How to invest in stocks to get better returns, know the strategy, How to invest in stocks to get better returns, know the strategy
Methods of Investing in the Stock Market (Photo – istock)
- Indian stock market is at the highest level.
- The stock market sometimes falls sharply.
- When to invest in this risky market, you can know about it in detail below.
Many investors with high risk appetite prefer to invest directly in equities. The Indian stock market is currently at its all-time high, but investors have no idea whether they should continue investing or exit from their current investments in stocks. They fear that if the market falls below this level, they may incur losses. And at the same time, if the market continues to touch new highs like this in the coming days, they would not want to miss out on the potential gains either. So, what should they do now? What should be their investment strategy when the stock market is at an all-time high? I have discussed some useful things in this regard.
Consider Investing in Dividend Paying Stocks
You can get returns on your investments in stocks in two ways: first through capital gains, or dividend income through which companies share their profits with shareholders. If the company you invest in is a cash-rich company, generates regular income, and has low debt, there are chances that it will continue to pay dividends. Typically, companies that regularly pay higher dividends are less affected by market volatility. So, even though the stock-market is currently trading at its all-time high, you can look at stocks that are fundamentally strong, have a good dividend paying history, which may have a good dividend payout in the future as well. There is a possibility of paying dividend continuously. But, before considering investing in dividend paying companies, it is important that you understand the tax implications as well. The investor has to pay tax on the dividend income. So, if you get dividend income, you have to pay tax on that income as per your applicable tax slab rate.
To make more money you can do this by investing in stocks for a short period of time and then exiting, commonly known as speculation. The main difference between investment and speculation is that investment focuses on prior analysis and risk management to generate potential returns, whereas speculation does not rely on research—instead it focuses on the ‘probability’ to generate income. is trusted. When the market is at its peak, you have to be prepared with all the strategies to mitigate the associated risks. Investing after doing a thorough research can help you avoid unnecessary risks and also reduce the chances of loss.
Follow strict stop-losses on short-term investments
As the name suggests, the ‘stop loss’ is a pre-set limit reached by the investor to exit the investment position in order to prevent further losses. For example, if you have invested in 100 shares of “XYZ” at Rs.1000/- per share. After a few days the price of the shares of “XYZ” starts falling. When it reaches Rs.900/-, you set a stop-loss of Rs.850/-. This means that you will wait for the price to drop to Rs.850/- to exit your investment position. Next day, the stock price opens at a low of Rs.840/- due to which the stop-loss is triggered and you sell the shares of “XYZ” at Rs.840/- and you earn Rs.16,000/- ( 1 lakh – Rs.84,000/-). But later the price of the shares of “XYZ” falls to Rs.600/-. Because you no longer own shares in “XYZ”, you are saved from losing more because of the stop-loss.
Therefore, when you invest in stocks, you must strictly follow the stop-loss. This will help you keep your losses to a minimum. When the price of your stock rises, you should shift the stop-loss upward or at the same time according to a predetermined percentage of the stock’s price to ensure that you can lock in the profit. The process of gradually shifting the stop-loss according to the price of the stock is called trailing stop-loss.
Put your investments in different fundamentally strong stocks
Opting for fundamentally strong stocks has the advantage of a faster recovery after a stock market crash, along with many other benefits. Therefore, while choosing stocks for your portfolio, one should focus on fundamentally strong stocks including stocks with solid track record, low or zero debt in accounts, good cash-flow level, high growth in revenue, attractive profitability and a promising growth plan . Your goal should be to diversify your investments in different sectors as well as invest in stocks of other companies so that you can minimize the risk. If a particular sector or stock underperforms, over-investing in one sector and investing in only a few companies can increase your risk.
Avoid investing excessively and if you are a beginner, use SIP mode
Before investing in the stock market, you must know your risk appetite. You should always invest as much as you can afford to lose. The stock market is highly volatile and you should invest only if your finances are not affected by the daily fluctuations. If you have the ability to do stock market analysis, then direct investing in the stock market can yield huge returns in the long run provided you understand the risks as well. It is very important to avoid excessive investment i.e. investing more than your risk appetite and financial capacity. If the market goes down, investing in stocks can result in huge losses. For beginners, Systemic Investment Plan (SIP), investing in top-rated mutual funds can be a better option to get good returns in the long run.
(The author of this article is Adil Shetty, CEO, BankBazaar.com)
(Disclaimer: This information is being given on the basis of expert reports. Markets are subject to risks, so take your own advice before investing.) (This article is written for informational purposes only. It is for investment purposes only.) should not be construed as financial or other advice)
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