In our day to day lives we see lot of people having a desire to be rich and they want to achieve it overnight. But in reality it doesn’t happen that way at least for a vast majority of the population.
While there is no denying the fact that some people due to luck have managed to become rich overnight we cannot expect the same to happen to us. It may or may not happen. Some people have beginners luck in stock market and had managed to make quick money.
But the question is “ Is such a success sustainable and long lasting?”.
The answer to that question is “ No”.
The only way in which you can make sustainable long term money in the markets is by learning the tricks of the trade and sustained efforts to educate the nuances of the stock market. In this blog we are going to discuss 5 best stock market tips for beginners which will help them to become successful in the long run.
- Open a trading account with a stock broker
The first step in stock market trading is to open a trading account with a stock broker. There are many brokers who offer trading account to individuals to trade in stocks. While discount brokers offer zero brokerage for delivery based trades they don’t offer any ideas as to what stocks to buy etc.
A beginner is better off to use the services of a stock advisory who provides stock ideas which will help you to gain knowledge and guide you to make money. A stock advisory will also hand hold the beginner investor and will help him/her to manage their portfolio profitably.
2. Learn the Basics
The trick to become successful is to have the inclination to learn the basics. Most people who fail in the stock markets due to their lack of time or inclination to learn the nuances of the stock market. This is the most important action that must be done by a person who desire to be successful in the long run.
3. Learn technical/ fundamental Analysis
Any person who desires to be successful in the stock market must learn technical/ fundamental analysis. Whether a person must learn technical analysis or fundamental analysis depends on his time frame for investment.
If a person is looking for short term gains in his investment then he must learn technical analysis and a person looking for long term investment must learn fundamental analysis. A trader who does short term trading must use strict stop loss for every trader done by him/her.
4. Invest Regularly
Any person who is interested to invest in the stock markets is better off to invest regularly. It is better off to invest regularly either quarterly or monthly or half yearly depending on their convenience. A regular investment will take care of market volatility and helps to minimize risk & maximize returns.
5. Build a diversified portfolio
Any investor who wishes to invest in stock markets are better off to build a diversified portfolio of stocks. Diversification also helps to minimize risk and gives stability and long term returns to the portfolio.
For example if an investor had exposure to Steel stocks and the steel cycle turns weak the investor need not worry about it as other stocks in the portfolio will help the investor to generate alpha on the portfolio. The steel stocks will perform when the cycle for the sector turns positive.
While the above 5 are the key success mantra for stock market beginners there a couple of very important things which a beginner must avoid. They are avoid using margin facility where you get a exposure of 5x on your investment.
Remember a 5x returns if successful gives a huge returns while a failure will wipe out your capital. So refrain from taking a margin trading facility. The other investment option a beginner must avoid is investment in in derivatives.
This is another leverage option which is risky and should be avoided by a beginner. On a parting note I would urge every one to understand the nuances of the stock market to sustain long term success in the stock markets.