6 steps to reaping high returns from stock markets

Dec 13 2013, 16:05 IST
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Investing in stock markets is not about hard work, but about understanding tricks of trading business. Investing in stock markets is not about hard work, but about understanding tricks of trading business.
SummaryInvesting in stock markets is not about hard work, but about understanding tricks of trading business.

The best way to make money in the stock market is to have a long-term strategy and a disciplined approach. Investing in stock markets is not about hard work, but about understanding the tricks of the trading business.

Stay informed

There is always an element of risk while investing in the stock market, but staying well informed of the day-to-day economic scenario can help one make informed choices. A good return on investment is the key when it comes to successfully handling the stock market. Taking informed decisions is a major contributor in enhancing the return on investment. To do so, one must understand the overall economic scenario, and the fundamental and technical nuances of the company's one has invested in. Keeping track of various sectors is also part of the overall strategy. One of the big mistakes a lot of investors make is to buy stocks of companies without having any knowledge of their business model.

Be an investor, not a speculator

Over the long term, one must act and believe as an investor. Investing in stock markets is akin to a marriage, which can have its ups and downs, but, over a period of time, brings financial stability and good returns.

Not every stock in your portfolio will give you positive returns, but compared to short term, most stocks can give you ample appreciation over the long term. The best bet is to have an investment portfolio with 5-10 years’ lock-in and beyond. A reason why a lot of people burn their fingers in the stock market is that they speculate, trying to get rich overnight rather than invest in a company for the long term.

Focus on fundamentals

Irrespective of the duration of your investment, a golden rule to avoid losses is to take a hard look at the fundamentals of the company before buying its stock. Stock markets generally move in advance of news or supportive fundamentals. Tracing the undercurrent of a trend can make the difference between profit and loss.

Fundamental analysis must act as the walking stick in rough times to counter any negative market sentiment. Remember, day-trading or short-term stock investing is only for a limited set of people. While the gains can be substantial, the losses can be even more phenomenal. Investing in the long term in fundamentally strong companies is the best and the safest way to earn money from the stock market.

Stay away from penny

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