How To Invest in The Stock Market

Stock markets are a tool to grow rich. They give you money in addition to your income.
However you cannot blindly invest in the stock market. Stock markets can be the path to great wealth or financial ruin.

You hold the path to riches or ruin in your own hands.

Invest only money you can afford to lose:

Never invest the money for your livelihood (day to day expenses) in the stock market.
You have to eat .Your children have to go to school. You cannot put this money in the stock market.

Never invest even your emergency money (cash set aside to meet say 6 months of your expenses) in the stock market.

Don’t try to time the market. Spend time in the market:

You can never predict the stock market. It moves up or down faster than a rollercoaster.
You have kept money aside to invest in the stock market. The markets have been down for a long time. You decide to put in money in the stock market after a few days.

Positive news has come in the market and the stock markets have risen so fast there is no time to invest.

If you spend time in the market you will definitely make money. Stay invested for a few years and not only make a profit but also save on your taxes.

The profits you make after staying invested in the stock markets for over a year are called long term capital gains and are not taxed.


Do not expect the moon:

Investing in the stock markets does not mean your money will double in a few months.
If you are lucky (enter the right stocks at the right time) it could double or even give you a 300% profit in a year.

Your money can also reduce by half in a few days.

Set realistic expectations while you invest in the stock market. You could set a target of 12% returns in a year and if you achieve this target you can sell your shares. Never look back as to how much more you could have made in the stock markets.

Know when to sell your stocks and you will make a profit.

Do not let emotions cloud your mind:

Emotions in investments can kill your returns. You work in a software firm and invest only in IT stocks.

You hold some of these stocks for many years even though their price has reduced by half and their fundamentals are weak.

You invest in shares of the Company you work…well just because you work there. There is no sound investment logic in what you are doing.

You have bought shares of a Company with your first salary even though after 5 years the price remains the same.

Remember: Never let emotions cloud your judgement.

Know what you are doing:
Take time to read up the stock market (Learn its history).Know how the stock indices are calculated.
Know why stocks go up or down. Invest wisely and make good returns.