• HDFC
• 06 Oct 2018
• Equity Product

HDFC, Tester

The stock market is a paradox - simple as well as complicated. It is simple for those who can keep their mind and emotions in check, whereas difficult for those who may struggle with control. Although you need to know about the technicalities and fundamental analysis, here are some things to keep in mind to become a fairly successful equity investor.

1. Timing Matters: The stock market is a game where someone buys a company stock and sells it at a particular point in the future. People lose money when they are unable to time the markets. For example, in a highly bull market, the world will keep buying  stocks even if the stock market is at a peak and there is a chance of dip in the market levels. On the other hand, people will be afraid to buy stocks when markets have witnessed a huge correction and most stocks are available at very cheap prices. This is because everyone likes to follow the ‘trend’. No one really knows what the highest or the lowest possible level for the stock market can be.

 

You invested money will benefit if you are able to overcome ‘greed’ at extremely high levels in a bull market when every stock’s price rises without any reason. Similarly, you should be able to overcome the ‘fear’ at extremely low levels in a bear market when every stock’s price falls irrespective of how good it is. Remember: Buy when all others fear, and sell when all others are greedy!

 

2. Patience is the Key: This is easier said than done. The stock market will test your patience and control over your mind multiple times. Like life, the stock market is a roller coaster ride – you will never witness a stock’s price move only in a single direction. It is usually a cycle where the price goes up as well as down during certain phases. Even the stocks that earn profits for you will probably see a downfall sometime. The idea is to pick the top quality stocks and have total conviction in them even during the lull period when the stock prices may fall. Stick with such stocks during their tough times, and they will help you emerge profitable when the tide turns.

 

3. Bring in Mental Discipline: Ask the greatest champions in any field about what their most treasured mantra for success. Most would talk about the importance of mental discipline and implementing what they had learned. No champion has ever survived without having mental discipline. The same principle applies to equity markets. You need to develop the discipline to not trade in your stocks when there’s a temporary high. One way to do this is to consider your equity investment as having a long lock-in period like some a PPF or fixed deposits. This will ensure you do not waste time in tracking your stocks on a daily basis when your goal is to invest for the long term.

 

4. Keep Learning:The world of equity investing is ever-changing and volatile like an ocean. It is impossible to learn everything in a short span of time. The trick is to never stop learning, especially from your mistake. Be a wise learner and make sure you overcome the habit of repeating your mistakes. You will always make new mistakes – but, if you continue to make old mistakes as well, it could prove to be troublesome for your equity investment experience. Leveraging a stock trading app can help you stay informed and monitor your investments effectively, thereby minimizing the risk.

 

5. Be Passionate: Don’t treat the stock market as just a place to make money. It is not a ‘get rich quick’ scheme. While many may call it by different names, the equity market is a place where human behavior gets tested on several fronts. If you treat it as just another income generating avenue, you might succumb to its pressure sooner or later. In order to survive the markets, you need to be passionate about the same. Remember, investments in equities have` the potential to give you great profits. So, make yourself battle ready and be absolutely passionate to learn the nuances of the stock markets before diving into it.

 

As you can see, the points to consider before stepping into the world of equity investments are quite simple. The tough part is remembering all of these when you are deeply involved in the stock market with your hard-earned money. That is the time when human behavior takes over and sometimes leads to mistakes. It is not possible to eliminate the mistakes. However, you can keep them to a minimum by following the above-mentioned pointers.