5 Tips to consider before investing in the share market

Investing in the share market has several benefits. One can expect higher returns on investment, grow wealth to fulfil life goals and beat inflation. But this type of investment also carries some level of risk. So, beginners need to have a basic knowledge of the share market before investing. The following tips should be kept in mind before making investment decisions related to the Share market-

  • Learn the basics- Try to understand the basics of the stock market and its related terminologies before beginning the investment journey. So many online resources, business channels and magazines can help enhance your market knowledge.
  • Conduct thorough market research- Make an effort to study different companies rather than solely relying upon others. Investors should identify potential sectors and the companies within these sectors that are worth investing. Low-priced stocks are tempting but risky options. Analyse top gainers today listed on NSE to identify the stocks performing well. One must not conclude or make hasty decisions based on a single day but asses their performance and trends over some time to make well-informed decisions. Beginners should focus on long-term investment and can move into trading once their skills and knowledge improve. For long-term investment, large-cap companies are more suitable owing to their stability.
  • Prepare a list of financial goals before investing- It is important to prepare a list of financial goals. It essentially means the capital you require at various stages of life. Your goals can be accumulating wealth to fund the higher education of children, buying a new house, leading a comfortable life post-retirement etc. Depending on your short-term or long-term financial goals and your risk appetite, you can assess different trading or investment options. Define the entry and exit points based on the loss you are ready to bear per trade.
  • Control your emotions- It is easy for beginners to get carried by emotions of fear or greed. Such emotionally driven decisions do more harm than good. If a critical situation arises, one must try to analyse the market, understand what experts have to say, take into account your entry and exit points decided before investment and then make a well-informed decision. Using stop loss strategy, investors can protect themselves from making emotional and hasty decisions.
  • Diversified portfolio- Investing in different financial instruments can help minimise losses. You can create a balanced portfolio by investing in the best small-cap stocks and large-cap stocks of various sectors. Market conditions keep fluctuating which affects the performance of different stocks. Sometimes, small caps perform better than large caps. At other times, the opposite happens. This way, Investments performing well can balance out the plummeting ones. It is also important to continuously monitor your investment portfolio to determine the performance of various assets.

Conclusion-

Many individuals are attracted to the enticing world of Stocks. But beginners must understand the intricacies of the market before they plan to invest. After making a plan, investors can begin their investment journey with 5paisa which is a popular discount broker. It offers low brokerage rates, an excellent trading platform and suggests tips and strategies to help investors make better decisions.

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