Investors

Clear these Fundamentals before Becoming an Investor

People who earnestly want to join the stock market should impart knowledge about the stock exchange and other relatable terms
Clear these Fundamentals before Becoming an Investor
Image credit: Shutterstock
4 min read
Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Success in the stock market is a long, studied process. The successful investors don’t attain affluence in the stock exchange market within a day. Skilled investors like Warren Buffett and George Soros monitor the market for a prolonged period, test the potential of the companies, and then deal in the stocks.

Avoid Fatal Mistakes while Dealing in Stocks

Since the stock market is highly erratic, estimating growth and fall of shares, in the long run, is difficult. Even veterans are sometimes mistaken in gauging future valuation of stocks, in turn, missing out to bet on high-yielding shares. A similar situation somewhat happened with Berkshire Hathaway’s CEO, Warren Buffett.       

In an interview, Buffett admitted his folly for not buying Amazon shares in the past and underestimating the company’s potential.

“Yeah, I’ve been a fan, and I’ve been an idiot for not buying (Amazon shares), Buffett said. “But I want you to know it’s no personality changes taking place,” he added, as reported by the international news daily, CNBC.

The way Buffett overlooked the now-spiking Amazon shares, similarly, other investors can also make the same mistakes. To avoid this, aspiring investors should have in-depth knowledge of the share market.     

The Stock Market is not Rocket Science

The complex structure of stock exchange and volatility of the market deters common masses to enter the market. For this reason, many people, despite having an interest in the stock market, avoid dealing in stock.

This, in turn, makes the lot alien to ordinary investment phrases such as “I got in early” and “the trend is your friend”. Understanding these terms is not necessary for people who don’t want to deal in stocks. On the other hand, people who indulge in stocks and earnestly want to join the stock market should impart knowledge about the stock exchange and other relatable terms.

Stock Market Index

Comparing one group of shares to another is possible owing to the stock market index,which calibrates stocks of a particular niche or segment and then represents prices of the listed or registered company. Later, the market index is utilized by investors and other investment companies to represent their portfolios and plan further moves. Some of the renowned market indexes are BSE Sensex, Nifty 50 and Nikkei 225. 

Gaining  Information about Stock Trading

Trading in stocks is a risky job if one does not possess knowledge of the market. Further, one should try to create an ideal, diversified portfolio so that inflation in stock exchange does not affect one’s acquired stakes.

To grasp knowledge, one can do short-term courses of investment or partner with experienced investors so as to apprehend the stock market better. Buying stocks at a low price and selling stocks after their valuation increases is what all beginners should understand. In this buy and sell process, time plays a pivotal role; henceforth, the new investors should learn as to what the right time for investment or divestment is.

Bull Market and Bear Market

The Bull market and Bear market are subsets of the stock market; both these markets are named after witnessing characteristics of Bull and Bear. When stocks surge upward and investors are optimistic, then the market is called the Bull market.

On the flip side, a depressive market where the investors are certain that the stocks will go down in the offering,is called a Bear market. When the market is downtrend, stock valuation decreases, thus deterring deals in stocks.

New investors should learn the abovementioned terminologies of the investment segment. Furthermore, beginners should gain in-depth knowledge of the stock market in order to make sound decisions.

This article was originally published by Jaspreet Kaur.

More from Entrepreneur

Learn to be a better leader and develop successful marketing and branding strategies with Dr. Patti Fletcher's help.
Jumpstart Your Business. Entrepreneur Insider is your all-access pass to the skills, experts, and network you need to get your business off the ground—or take it to the next level.
Create your business plan in half the time with twice the impact using Entrepreneur's BIZ PLANNING PLUS powered by LivePlan. Try risk free for 60 days.

Latest on Entrepreneur