This document provides guidance for first time equity investors. It outlines several important points for new investors to consider:
1) Know the rules of the equity market and understand your purpose for investing - whether it is for savings or surplus funds - to help choose appropriate stocks.
2) Keep a clear time objective in mind for both buying and selling stocks to help achieve your investment goals.
3) Understand your risk profile as an aggressive, moderate, or defensive investor to select stocks that match your risk tolerance.
4) Invest in industries you have expertise in to better understand growth prospects and risks.
5) Stay updated on your stock investments through research and avoid relying on tips or rumors.
2. Know the rules of the game
“Equity market (commonly known as share market) is place of
possibilities. However, you can still play a good innings by
following these important points”
3. Understand your purpose of investment
We advise you to have a “clear vision” before you push your money
into stocks
Before you invest your money, broadly define your purpose into
“Savings” or “Surplus”.
This would help you choose your stocks
For instance:
“If you are looking for ‘savings’, you can go for blue-chip stocks and
hold them for a longer durations (Delivery), and if you are looking
for ‘surplus’ you can use the ‘fast entry, fast exit strategy’ (Intraday)”
4. Keep your ‘time objective’ in mind
Doing the right thing at the right time would help you achieve
your objective
While buying a stock, have a clear time-bound objective ready
for its sale
For instance:
If you are investing for retirement, calculate your retirement age
and expected return from the stock
5. Know your risk profile
(Aggressive–Moderate–Defensive)
Know your risk appetite
Risk appetite refers to the capacity of taking a risk at a given
time. This would help you pick right stocks
Aggressive investors do not hesitate to take risks while
investing in vulnerable stocks
Moderate investors take medium risk. However, they might
buy tricky stocks sometimes
Defensive investors will not invest in dicey stocks and will
only invest in stocks they trust
6. Invest in what you understand the BEST!
It is always good for you to invest your money in the business
you know better
This will help you understand future scope for the sector,
expected growth, expansion, and risk forecasting.
For instance:
If you know the retail shopping market, you can make smart
investments keeping future scope for FDI, FII, and growth
prospects in mind
7. Stay updated on your stocks
Once you push your money into the market, it is extremely
essential to track the progress of the invested stock
You should track all the news reports, discussions, court
judgments, and other important updates such as M&A
This will prepare you for unforeseen events in the market
8. Don't fall prey to "Tips" or "Rumors"
Nobody can give you a definite tip about stock prices. Do not
fall prey to such tips
Rumors are false information passed by people. Always
confirm the source of the information
You can track their authenticity by approaching the
spokesperson of the organization, stock exchanges official
website/handles, and SEBI notifications.
9. Read financial reports of your investment
Reading periodic reports and financial journals will help you get
actual insights
Company's annual reports and quarterly reports will provide
you with credible numbers
These reports will also update you on the company's future
avenues
10. Do not forget to SALE your investment at the Right Time
As discussed, stock trading is a game of possibilities. Thus, as
an investor, it is important for you to exit the stock at the right
time
Do not wait for unrealistic profit and grab the realistic profit
They say, “In stocks, your exit is more important than the entry”
11. Thank You
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Equity investments involve market risks.
Please read investment related documents carefully before investing.