If you get the right guidance, it is not that difficult to become a successful investor. Provided, new investors know what to do and what not to do.
Investment tips for beginners: New investors may sometimes feel that investing is a difficult task. Sometimes they worry about the risks associated with investing, and sometimes the technical terms related to finance confuse them. But the truth is that if you get the right guidance, then becoming a successful investor is not that difficult. Yes, to do this, new investors must know what they should do and what they should not do.
Here we will try to understand in an easy way what is necessary to do to achieve success in investing and what things we should stay away from. If you are just starting your investment journey or want to improve your strategy, the 7 tips given here will help you move forward with confidence in the world of investment and avoid mistakes. Out of these, 4 suggestions tell you what you should not do and 3 things are such that doing them is in your interest.
What not to do for successful investment
First of all, let us look at the mistakes that any new investor should avoid for success. Just like for a person who is just learning driving, knowing about the brake is more important than knowing about the accelerator, so that no accident happens at the beginning of the journey.
Avoid trading
A big misconception is that trading is a good way to make quick money in the stock market. Many people believe that they can make huge profits by buying and selling stocks repeatedly. However, trading is not investing. Trading involves transaction costs and constantly predicting market movements, which is a very difficult task. Successful investing means buying shares of good companies or units of good funds and then holding on to them even during market fluctuations. It is very important to understand and trust the long-term performance of the company or fund you are investing in. You can get better returns only by investing for a long time.
Stay away from derivatives
Investing in derivatives can also be called an easy way to waste capital. Investors in it are often lured by the greed for profits, due to which they sometimes take leveraged positions many times more than the original amount of their investment. In a rising market, it provides an opportunity to increase profits, but it can also lead to a huge loss if the market falls. Trading in derivatives is a very complex task and cannot be considered right for most investors.
Be careful with IPOs
People often consider investing in Initial Public Offers (IPOs) as an opportunity to make quick profits. It is true that some IPOs give profits to their investors on the day of listing, but generally there is a big risk associated with investing in IPOs. This is because investing in shares that do not have a previous trading history is always risky. Many times IPOs of good companies are often oversubscribed and it becomes difficult to get allotment in them.
On the other hand, shares of companies in which investors are less interested can be easily allotted, but the risk of poor performance is higher in them. Apart from this, many times a lot of hype is created in some stocks before the IPO, due to which they get oversubscribed, but their performance is not good after listing. Many IPOs are in effect Offers for Sale (OFS), in which the company’s existing investors / promoters take advantage of the market conditions and sell their shares at a higher price than reasonable. In such issues, new investors have to suffer losses later.
Beware of too good offers
If you come across an opportunity or offer for investment that seems unbelievably good (Too Good to Believe), then be careful immediately. Such an investment opportunity can prove to be a big warning of danger. Being cautious of such opportunities that seem too good can be considered a basic principle of safe investment. Investment schemes that promise sky-high returns with minimal risk should generally be considered a danger signal. Sometimes you may get information about such opportunities from a source in your social circle whom you trust a lot. But always remember that if something seems so good that you can’t believe it, then it is probably not worth believing.
What to do for successful investment
After discussing the things a new investor should stay away from, let us now know what is necessary to become a successful investor.
Develop a saving habit
The basis of investing is saving. No matter how much you earn, if you don’t save, you can’t invest. Without saving, you can’t take advantage of the best investment opportunities when they come your way. That’s why it’s important to develop a habit of saving a portion of your income. The sooner you develop this habit, the better. And once you have developed this good habit, you should insist on continuing it at all costs.
Invest for the long term
Investing should always be viewed from a long-term perspective. The market will fluctuate in the short term, but in the long term, the market trend is generally upward. Whether you are investing in stocks, mutual funds or recurring deposits, it is important to be patient. For those who are unsure where to start, recurring deposits or systematic investment plans (SIPs) in mutual funds are good options.
Increase your savings rate
As your income rises, so should your savings rate. Inflation erodes the value of currency, so it’s important to keep increasing your savings to keep pace with rising costs. Aim to save a certain percentage of your income and keep increasing this percentage over time, as essential expenses should generally decrease as income increases. If you include this in your planning, you will be able to build a large corpus with the help of compounding.
