8 golden rules you should know before entering the stock market

An intelligent investor knows when to invest or withdraw their money, how to calculate returns, and what to expect from an investment:whether it’s mutual funds, stocks, or gold. They are also aware of their financial goals and the tools to achieve them. While there’s no rulebook for investing, here’s what expert financial advisors have to say about how to become a good investor:

  1. Start early

The sooner you understand the concept of ‘compounding’ and exploit it to your benefit, the better your chances of improving your cash inflow. Compounding is money multiplying itself by procuring a profit from a mutual fund investment or another market tool.

  • Set your financial objectives carefully

Knowing your monetary goals and the period you are contributing over may help you adhere to your saving routine. For instance, if you have long-term objectives such as retirement, it could be safe to invest in mutual funds through SIPs or even stocks. In this way, you are likely to be less enticed to risk your savings for short-term benefits.

  • Diversify

Spreading your resources across a broad range of asset types tends to effectively decrease financial risk and improve chances of potential returns over long term. Holding an investment portfolio that includes mutual funds, SIPs, and stocks may protect your portfolio from market fluctuations as all the assets and securities perform differently under different conditions. In contrast, people sticking to a single financial asset will struggle to survive in the future.

  • Develop an investment habit

Rather than investing limited sums in mutual funds after certain intervals, you could leave less disposable money in your hands monthly by developing a consistent savings habit. Regular savings are essential if you’re trying to understand how to become a better investor.

  • Timing the market versus time in the market

As a rule, you should buy investments just as their value is about to increase and sell just before the value falls. However, nobody knows what direction the securities market would take. Anticipating a good time to buy or sell could mean that you end up doing so at an inopportune time. Only by purchasing and holding investments over time do you learn how timing the market works and how to be better at investing your money.

  • Closely monitor your portfolio

The stocks you buy today will change in value over the long run. As your investment targets change, how you diversify your money across different securities will also change. Hence, to make sure you are on track to reach your goals, you to closely monitor your portfolio periodically and rebalance it if need be.

  • Be patient

No one enters the stock market fully knowing what securities and stocks to buy today. Instead, you gather information each day and learn how to be a better investor. A progressive cycle runs throughout the period that you are investing in the securities. A critical aspect of investing is to remain patient and practical. There will be times when you will want to withdraw abruptly but you must resist the temptation to act on impulse rather than making a rational decision.

  • Seeking expert guidance

Selecting the right blend of assets to meet your investment goals could be tricky. After all, a lot goes into making smart investment decisions. To build, monitor and optimise your portfolio, it is prudent to reach out to a financial advisor who can curate investment plans that are unique to your investor profile.

Reach out to an expert today and decide upon a smart investment plan and strategy that could work for you!