Equity market (commonly known as share market) is a place of “possibilities”. However, like in cricket, the game of glorious uncertainties and possibilities, you can still have a decent innings by following these important points and knowing the rules of the game.
Understand your purpose of investment
Get a clear vision of your investment before you push your money. Broadly define your investment purpose by categorizing it into “savings” or “surplus”. This will definitely help you choose a perfect stock. Remember, even in cricket, strategies are different for test matches, one-day matches, and T20 matches. Choose wisely.
Therefore, if you are looking for ‘savings’, you can go for blue-chip stocks and hold them for longer duration, which is called a “delivery”. However, if you are looking for ‘surplus’, you can use the ‘fast entry, fast exit strategy’ better known as “intraday”.
Keep your ‘time objective’ in mind
Doing the right thing at the right time would help you achieve your objective. While buying a stock, have a clear and time-bound objective ready for its sale.
For instance, if you are investing for retirement, calculate your expected age of retirement and expected return from the stock.
Know your risk profile
Risk appetite refers to the capacity of taking a risk at a given point of time. Assess your risk profile. It is simple. Here is how you can rate yourself
Aggressive: Aggressive investors do not hesitate to take risks while investing in vulnerable stocks (Like T20 cricket bashers, Whack! I smoked that piece of leather into night sky)
Moderate: Moderate investors take medium risk. However, they might buy tricky stocks sometimes (Like ODI players, Steady Eddy! I’ll take it up ball by ball)
Defensive: Defensive investors will not invest in dicey stocks and will only invest in stocks they trust (Like test cricketers! I’d better follow the tried and tested methods and stick to my basics, it is better to draw than to lose.
Invest in what you understand the BEST!
It is always good for you to invest your money in the business you know better. This will help you understand the various aspects such as scope for the sector, expected growth, expansion, and risk forecasting.
Therefore, remember the bottom line ‘if you know which shot to play for which delivery, no bowler can easily fool you into playing a shot fraught with risk’. In simple words, if you know your game, nobody dare fool you.
Stay updated on your stocks
Once you push your money into the market, it is extremely essential to track the progress of the stock in which you have invested. You should track all news reports, events and developments, court judgments, and other important updates such as M&A. This will prepare you for unforeseen market events.
Don’t fall prey to “Tips” or “Rumors”
Always remember the all-important point ‘NOBODY can give you a definite tip about stock prices’. Do not fall prey to such tips. Rumors are false information circulated by people. Always confirm the source of the information. You can track their authenticity by approaching the spokesperson of the organization, stock exchanges’ official website/handles, and SEBI notifications.
Track the progress of your investment
Reading periodic reports and financial journals will help you get actual insights. Annual and quarterly reports of companies will provide you with credible numbers. These reports will also update you on the company’s prospects.
Do not forget to SALE your investment at the Right Time
As you already know, like cricket, stock trading is a game of numerous possibilities. Thus, as an investor it is important for you to exit the stock at the right time. Do not wait for unrealistic profit, instead, grab the realistic profit. They say, ‘in stocks, your exit is more important than the entry’.
Written By: Pinakin Odhekar
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.