Investing In Equities
It is riskier than and definitely demands more time than other investments. However, it can probably be more rewarding than you can imagine and certainly very exciting! World over, and even in India, stocks have outperformed every other asset class over the long run. Stocks are probably your best bet against inflation too.
Steps To be followed before making any investment in Equities
Step 1: Understand how the stock market worksWhen you read you begin with A-B-C. When you sing you begin with Do-Re-Mi. And when you invest in stocks you begin with business-company-shares.
Also Read: Mutual Funds for Beginners
Step 2: Learn how to choose a stock
Having understood the markets, it is important to know how to go about selecting a company, a stock and the right price. A little bit of research, some smart diversification and proper monitoring will ensure that things seldom go wrong.
Step 3: Decide how much to invest
Since equities are high risk, high return instruments, how much you should invest would really depend on how much risk you can tolerate.
Step 4: Monitor and review
Monitoring your equity investments regularly is recommended. Keep in touch with the quarterly-results announcements and update the prices on your portfolio worksheet atleast once a week.
Also, review the reasons you earlier identified for buying a stock and check whether they are still valid or there have been significant changes in your earlier assumptions and expectations. And use an annual review process to review your exposure to equity shares within your overall asset allocation and rebalance, if necessary.
Finally, ensure that you avoid the below mentioned seven most common mistakes and sail smoothly into your financial bright future.
1. Believing that trading is the same as investing
2. Being too conservative with your money
3. Being too aggressive with your money
4. Keeping the ‘duds’
5. Incorrect asset allocation
6. Timing the market
7. Overconfidence
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