Most of people simply tend to follow trends of the market and end up losing money. It is important to have a clear strategy with regard to investment in the stock market.
Study the company
Before putting your hard-earned money in a stock of a company make sure to understand the company properly. Study about its past, management team and the industry. Also try to understand the future of the company. Some companies may be giving high returns in the present but they may not have a good future. It is not wise to put money in a company that has already reached its peak. Instead invest in a company that has a great future even if it is small in the present time. The management team of a company is very important as all decisions are taken and implemented by the company management only.
Invest do not trade
It is advisable to invest money in the stock market. However, make sure to not indulge in intense trading of shares. It is seen that in a long run those indulging in intense trading end up making not much money. The wise thing is to put a significant amount of money in a company that has a promising future and then wait for couple of years. Many people indulge in intense intra-day trading feeling that they are soon going to become rich. However the market has its own nature and it tends to reward people with patience.
Do not follow crowd
It is important to follow your own your instincts instead of following trends of the stock market. Majority of people simply tend to follow the herd ending up with not much amount of money. Being a herd has no rewards. Usually it is the opposite. If all people seem to be buying stock of one company then it is advisable to avoid the stock. On the other hand if there is a panic in the market and people tend to avoid a share then it may be a good opportunity to buy that.
Especially look for the opportunities when shares of a good company are down due to some sudden bad news about the company. If the fundamentals of the company are fine then it is a great idea to invest at that moment and reap benefits. One good example is of Indian IT company Satyam. Due to a recent scandal about its bookkeeping practices the company stock went down to the level of Rs. 10 when normally it was around Rs. 100. People were selling stock of the company fearing a total collapse. Soon after the government intervention the stocks of the company went up to the previous level of Rs. 100 within a month. So, anyone who went against the crowd must have made 10 times returns on the stocks within a month. To put it simply, follow your heart and instincts, not the crowd.
Due to the growth of the media, there are several business TV stations that have so-called experts giving advice to the masses about what company to invest in. Sitting in your home you may feel that he is giving advice to only you. However, the same piece of information I being shared with millions of people sitting alone in their rooms. So, take their advice with a pinch of salt. Most of the times when they advice about a company share, the company shares have already touched a high. So, avoid them. You should pick stocks of those companies that have not peaked in the market, and have a great future as they are growing.
It is important to have patience while investing in the stock market. Frequent trading may not yield you desired results. It is seen in practical world that most of the people who make significant amount of money in stock market do it by investing in a promising stock and leave it there for couple of years. On the other hands those indulging in frequent intra-day trading, even for a long period, end up with not much money. Patience is certainly a virtue here.
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