5 Tips to Note if You're a First-Time Investor
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One of the biggest milestones that one achieves in their lives is when they start earning a living. It is the time when one steps in the real world, all on their own. But, what is more difficult than earning money is saving money. As Warren Buffett rightly said, “Do not save what is left after spending; spend what is left after saving”. To fulfill the myriad dreams that one has, it is essential to save up as much as possible. Living in the moment is essential, but, foreseeing the future holds equal weight. Regular investment helps one in creating big assets in life. Baby steps in the world of equity are essential before taking a big leap. Starting small paves way for achieving bigger goals in life, both at personal and professional level.
With so many options available in the market to invest one’s money in, it becomes very difficult to make wise decisions. For a first-time investor, all this seems like rocket science, and it is only natural. Understanding the volatility of the market is not a child’s play. However, thanks to the advanced technology, one can know what the experts have to say, how people are reacting to a certain situation in the stock market, understand what suits them the best and make decisions accordingly. So, here are 5 tips to keep in mind if you’re a first-time investor:
1. The right time is today: It is always a good time to start investing in the market and create wealth. Equity investing is a long journey, the sooner you start the better. You should also know the power of compounding. If you start early and take systematic investment route to invest in Equity Growth Oriented mutual fund then your monthly investment of just INR 5,000 at the CAGR of 15% in 30 years grow up to whopping INR 3,46,16,398 (USD 4,94,391.40).
2.What is best for you: The most important question that new investors have to tackle is which stock to buy. It is advisable to buy stock of blue-chip companies (A blue chip is a nationally recognized, well-established, and financially sound company) which are there in NIFTY Index. The growth of these companies is very predictable in terms of sales and profit they generate. One additional check is these companies are followed by many Stock Analyst/brokerage firms and very well researched.
3.Never Time the market: As most of the market gurus advise it is a futile exercise. Rather start with small quantity and have conviction. If the market goes down the same stock can be added at a lower level. As you go up the ladder, you can figure the happenings of the market and act accordingly.
4. Performance of the market: Market performance is driven by the sentiments and global flows. While the company’s performance is driven by fundamentals like how the company is growing sales and profits, how big is the moat, how strong is the brand, what are the entry barriers etc. Sometimes the market runs ahead of the fundamentals which make the stock of the company overvalued while sometimes the market is pessimistic and pulls down the stock prices which make them undervalued.5. What to sell, what to buy: Let the winners run. What normally happens when the stock price of a good company starts running is people are tempted to sell while the stock of the laggard companies when it goes down they keep it in the hope of it will eventually come up. This behavioral trait eventually hurts the return of an investor. So never pluck the flowers and water the weeds.