What are the basic principles of investment
What are the basic principles of investment?
An investor is one who invests in the stock market. Everyone should be careful about many things before investing. Here are ten basic principles related to investment-
1. Do not invest your entire saved amount only in shares. For example, if you have Rs 1 lakh, then invest only Rs 25 thousand in shares. Start with 25 percent.
2. Instead of buying shares of a single company, invest in shares of different and good reputation companies. Like a share I.T. Sector, second in banking, third in infrastructure, fourth in telecommunication or cement or steel etc. But all those shares should be of companies having good reputation.
3. While buying and selling shares, you must also have ‘PAN’ (Permanent Account Number) and Demat Account.
4. To buy and sell shares in the stock market, you should choose a broker whose reputation and service is good. He should have information about all the ups and downs in the stock market. Also, ensure that it is registered.
5. Don’t be misled by tips-culture. People will start advising to buy many new scripts. The prices may be increasing in them, but you may have to pay for buying without thinking.
6. If your relative, friend or neighbor has got a good price by selling a share, then you should never be under the illusion that you too will get a good price by buying and selling the same share.
7. Do not invest in any company by reading or hearing about stock market rumors and media. Complete information about the company is available on the company’s website. Take a decision only after reading it thoroughly.
8. Investing is a long-term game, but what is called day-trading is speculation. In this, the process of buying and selling shares quickly takes place. Therefore, understand the difference between investment and speculation. There is a lot of risk in day trading. In this your savings amount can also be completely lost. But if you become a master in day-trading then it can also become a full-time career.
9. Whenever you buy shares, buy for the long term. If your prices are low today, there are chances of them increasing in the future. Despite this, if you are getting good profits in between then you should book profits. Sell at least 50 percent of the shares with profit. If you have bought shares of a company with weak reputation, then be prepared to bear the loss.
10. The stock market is very sensitive. Every kind of incident has an impact on him. Such as the impact of American economy, government events, inflation, results of companies, Asian markets, industries, hence there remains a state of ups and downs in it. You only have to keep track of your stock, not the index. If your shares are of a good company then they will increase again.
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Investment success hidden in seven points
If the basic realities of the stock market are understood, success can be achieved by avoiding failures. Here are the seven basic principles of investment-
1. When a period of recession begins in the stock market and buyers lose enthusiasm due to falling prices, in such a situation the reality of investors is that they stay away from the market. Whereas the truth is that this is the time when investors should enter the market and buy gradually and as they get shares at lower prices, they should keep buying them. You yourself consider whether you should buy or sell on the index of 21,000? And sell or buy on the index of 8-10 thousand?
2. One should invest in the company and not in the stock market. Seeing the ups and downs in share prices in the market, the market chases away those who run after them, whereas investors looking at the company’s work results and track record are not afraid of the market movements. There are many factors that influence the trend of the stock market, but the factors that influence the company are very few. So you should focus your attention on the company, not the market. Your partner keeps watching the movements of the stock market, whereas if the company is good in realty, then the stock market also gives good results. After the Satyam scam, the same company was acquired by Tech Mahindra and the fall in shares is the latest example of this reality.
3. Decide whether you want to invest or speculate! Generally people talk about investing in shares and start seeing the ups and downs in their prices from the very next day. As a result, they always remain worried after investing and later blame the market for their mental instability. The market is going to remain fickle. That is his nature. There is so much news flooding the market every morning that how can it remain stable? But you can remain stable. Yes, to be successful in the stock market, it is important that you as an investor accept both truth and reality.
4. ‘Whatever comes to the house, that is the profit’ – that is, profit or loss on paper in the stock market is a truth, but not in reality. Whether the price of your shares goes high in a boom or low in a recession, it shows your profit or loss, but only on paper. Investors should determine their level of satisfaction by keeping in mind the returns they are getting from stocks compared to traditional investment instruments. This means that investors should book profits by selling their shares at the appropriate time. Similarly, losses should also be booked at appropriate time and at appropriate level. Investors should take this decision keeping in mind their discretion and circumstances. One should not wait for infinite profits and in the same way one should not wait for infinite time for the prices of those shares to improve and return again. Yes, in case of no improvement, the loss should be accepted and the remaining amount should be invested in other shares.
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5. ‘Listen to everyone, follow your own heart. In the stock market you always pay attention to what people say and do and act accordingly. The day you stop blindly following people, the doors to your success in the stock market will open. As long as you remain part of the crowd, you will buy at the same time as everyone else and sell your shares when everyone else starts selling. The formula for success here is to buy when everyone else is selling and sell when everyone else is buying.
6. Do not have emotional attachment with any stock. One should be satisfied with the appropriate reward. Many times, you are satisfied by getting 8 to 10 percent returns by investing in fixed deposits of a bank or company. Investment in some shares may double in 1 month and in some in 6-12 months; But it is not necessary that this always happens. Do not permanently associate with any stock. However, in some exceptional cases, good shares can be bequeathed to children.
7. Equity shares are the best means for returns. History till now is witness to the fact that among the various investment instruments in the world, investment in equity has given the highest returns. The specialty of equity is that it also reduces the investment of investors to zero. Those investing in equity should accept this truth and invest in it only. Along with this truth, there is also another aspect that the person who had invested Rs 10,000 in a share like Wipro in the market and kept this investment for 27 years, today his investment has become more than Rs 200 crore. For this reason investing in equity is considered risky. Since the risk is higher, the reward is also higher.
