Stock market gives you higher return than other investment like real estate, PPF, insurance, fixed deposits and Gold over a long period of time. Here stock market means investment in direct equity (e.g. stocks). Stock market is the business for everyone; which has no prior requirements like large amount of money, man power resource, office, godown. Stock market business has no legal issue, no barrier of anti-social elements, no boss-client environment and can be operated from anywhere in the world without having sophisticated resources. Stock market is a pure business and not a gambling spot. Let me clear first. If you understand the underlying business and then invest, it’s a business; otherwise, it’s a gambling. This is applicable all the business of the world. If you don’t know or cannot understand how the stock market business works and how you should work in stock market; you should stay away because those who understand this business are ready to suck your money. Before start investing into stock market, you should be familiar with the stock market, how it works and how you should work.
Business (Investment) cannot be done just because someone says you to do so, or you heard something, or you believe something or you predict something to happen. Let me give you an example to clear the things. Suppose you want to invest in real estate. You heard about a property from a broker/friend. Will you invest directly in that property? Or do some analysis (like actual valuations, property location, re-sell value, etc) before investing??!! Then why you invest in stocks just because you heard about it from news channel/friend/broker, ask yourself. Most of the small and retail investors invest in the stock just because they heard/read it from somewhere and without having the basic knowledge about the stock. And most of the time they ended with the loss as they do not understand the stock market business and so they would not know why the stock price is falling, hold the stock or exit, when to exit from the stock, when to add more, etc. Telling you as a friend, if you don’t know or cannot understand how the stock market business works and how you should work in stock market; you should stay away because those who understand this business are ready to suck your money.
Now, for the beginner, the question is how to do Stock Market Business..??! Before Investing in any stock, you should know 3 basic things: 1-Company’s profile, 2-Company’s Financial status (Fundamental Analysis), 3-Price action in the stock(Technical analysis). Don’t be disappoint, if you try to know this, you will realize that it was a matter of 15-20 minutes only...! Lots of study materials and information are available over Internet, which helps you to understand the above 3 things. Keep in mind, learning comes first than earning. Besides these, below key points need to keep in mind before doing any business (including Stock Market Business).
7 Key points to do Business:
Business requires your time
In stock market business, if you have not time to watch your portfolio twice a day between 9:15am to 3:30pm, or you cannot spare time to analyse company’s quarterly result (basic details like revenue, profit, debt, etc) then you should not invest in equity directly. In such cases, you should go for Mutual Funds or you can take advice from the person who understands the stock market business.
Business requires your efforts
There is no easy money in any business and so in the stock market. Stock market business is simple but not easy. You should first learn how to do stock market business. You should put efforts to analyse company’s profile, quarterly result, technical charts, market’s overall sentiments, and economic data and so on. You should keep yourself aware about current news.
Business requires your patience
If you really take stock market as a Business then you should focus on creating wealth rather than double your money overnight. And wealth creation requires time and patience. Generally, People come here with a thought that they invest in a stock today and from tomorrow stock starts to move up...!! Most of the people I met till now are over expected about the return and time of return of their investments. Sometimes it happens, and it will happen to you, that you do research and find a stock and invest in it, wait for a year and still have no return from the stock. Finally your patience exhausted and you sell the stock. After that stock will run...!! Here, all is well, your research, your effort, your analysis. But the only thing that lacking is your patience.
Business requires your control over your emotions
In stock market business, you have to control your emotions. Most of the time, your emotions lead you to wrong entry/exit at wrong time in the stock, however your stock pick is right...!! Sometimes, your stock pick is wrong but you hesitate to exit from stock and continuously think that it will go up, it will go up, but it will not. You expect the stock to move up because you have bought it. Don’t tell stock what to do,but listen what the stock is telling to you. Do not fall in love with a stock. And if you are a trader in stock market then keep my words; your emotion is the biggest enemy of you...!
Business requires specific skills
You should have certain business related skills in every business and so in stock market business. You should know basic fundamental and technical analysis. You should be able to analyse market sentiments, company’s result, price action, etc. Most important skill in stock market business is entry and exit from investment(or trade). Read below example for clarification. There are three persons- A, B, and C. They invest in a stock which moves from 10rs to 100rs and currently traded at 50rs,-
- A bought the stock at 30rs at sold at 80rs. Make profit of 50rs.
- B bought the stock at 90 and still holding. Now, If he/she will sell at current price (50rs) then he/she will be in loss of 40rs.
- C bought the stock at 20rs and still holding. Now, if he/she will sell at current price (50rs) then he/she will be in profit of 30rs.
Business requires Money Management
Our experience says that, you should not borrow money to invest in stock market. One big reason for that is stock market may not give you regular income to pay interest for your borrowings. You should know your source of income, expenditure, and financial limits and then you should plan your investment wisely.
Business requires Risk Management
There is no business without risk. In stock market, you should and you have to calculate the risk-reward ratio before investing. Risk-reward ratio means to calculate how much is the risk if you will be wrong and how much is the profit if you will be right.
Do the business and business will reward you...!!