How to earn money from Stock Market?
The lure to earn good money always gets the investors into the lap of stock market trading. Several people have managed to earn big in the stock market but before making an investment thorough understanding of the stock market is must. Stock market offers a person to trade in both equity and preference shares. However, trading in equity is not at all easy. A person needs to have discipline and patience along with having a sound knowledge of the market.
The stock market is volatile in nature. Thus, this kind of nature makes it a little difficult for people to trade in. People often gets confused about questions like when to hold a particular security, when to buy them or when to sell them. These are some very random and normal questions that strikes the minds of the people willing to make an investment in the stock market.
There is no formula available which could help solve such queries, but there exists some rules which when followed can help one achieve success in the stock market. Rules are as follows:
1. Know the kind of trader you are:
There are basically two kinds of traders in stock markets; one kind includes those who follow fundamental investing and the second kind are the speculators. The major difference between these two kinds is the way they see the price of the stock. The investors who follow fundamental investing give less importance to the price of the stock when compared to the speculators. Such traders are more concerned about the fundamental strengths of any company. To make good money in stock markets, one should practice the fundamental method of investing.
2. Avoid herd mentality
To successfully earn through stock market, an investor should not believe what his acquaintances are saying. Any kind of decision be it about buying or selling a stock should not be influenced by any kind of rumors. This decision should be taken solely on the grounds of thorough research.
Warren Buffet- one of the world’s greatest investor stated that one needs to be fearful when the others are greedy and needs to be greedy when others are fearful.
3. Become fearless
Earning cannot happen if a person doesn’t seem to take risk. Taking risk will definitely help earn. Earning by investing in the stock market will mean taking risk. So, a person with fear cannot be a part of the market. Only people with fearless attitude can make money in this market. Other than risk, another factor to consider is the greed. One should not be greedy while making investment in the market. No trader can make profits every day. If you try to run behind that mirage, you will only end up disappointing yourself time and again. When the wind is against you, you will have little choice except booking a loss.
4. Fix your entry and exit points
Before you place the buy order, always determine the entry point and the price target of the stock. Price target is the price at which it is valued fairly, after taking into consideration its history and projected earnings. If the stock is running below its target price that is a good time to invest in it, since you will make a profit when the stock reaches its target price once again, or exceeds it. Keeping a fixed point for your entry and exit will also ensure that you do not sell the shares off as soon as you see a slight rise in the prices. Because of this tendency, you might lose the chance to make a bigger profit when the price of the stock rises further.
5. Maintain a diverse portfolio
All investing carries risk — it’s possible for some of the companies you invest in to under-perform, or even fold entirely. But if you diversify your portfolio, you’ll be safeguarded against losing all of your assets when investments don’t go as planned. By ensuring you’re invested in many different types of securities, you’ll be better prepared to weather stock market corrections. It’s unlikely that all industries and companies will suffer equally or succeed at the same level, so you can hedge your bets by buying some of everything.
6. Hire a professional
If you are a newcomer in the stock market, always consider to hire and seek professional help. in today’s digital world, we are blessed with internet which sometimes help us to create a well-researched stock portfolio. But still if you feel that your research is not worth the investment hiring an investment advisor can be the best choice. Even though the use of a professional can’t mitigate all risk of losses, you might feel more comfortable knowing you have an expert in your corner.
If you’re looking for an expert to specifically help with your investments, it could be worth considering a financial advisor. Financial Advisors focus on providing personalized advice on your investment portfolio, typically for a fee based on a percentage of assets under management.
Another lower-cost way to get a little guidance on investing is to use Algo-Trading. This can help you build a diversified portfolio and re-balance it when needed, often for a lower fee than a traditional financial advisor — though, of course, this service is digitally based, rather than provided through a human relationship.
Above are some general points which can help one make money through investment into the stock market. These are just some random points. These points may help some people and the same time might not help others. But relying on these will certainly not bring you losses.