Discipline to Follow While You Start Your Investment Journey
Markets are trading at all time high (Nifty @ 18000 + & Sensex @ 61000 +) and I am sure since Jan 21 most of you who was not in Equity Investments before, got active participation through opening a new Demat account or mutual fund (MF) folios. Most of the inactive Demat accounts got active and lots of new entrant participation goes up in the bull market. Today, we are sitting on highest Demat accounts and MF folio numbers in India.
This bull market we are witnessing is little different due to pandemic. It leads to low cost of living and as luxury goals are on backseat all of us have saved lot of money which eventually channelized to equity investments.
This is a very tricky time having highest probability of getting stuck in bad investment strategy especially when it comes to direct Equity Investments so just by following Simple but Golden rules of investment you can save yourself from getting in to wrong investments.
Avoid investment in companies whose product and process you don’t understand – Ask question to yourself on common data points (Fundamental Analysis) before investing into any equity. Listed companies’ data are easily available online so try to study and understand the business and processes.
Make your own decision and do not fall prey to TIPS / herd mentality – following what others are doing is simple but also very risky as every investor has got a different risk appetite so do not fall prey to such behaviors as it might lead to major loses in portfolio.
If you are first time investor then start with Investment Strategy and not the trading. While deciding on Investment strategy, beginner always try to go by past performance so we must be more careful as market is constantly evolving so data analysis is must, along with past performance. If you feel that you are missing the rally or fun then don’t worry such opportunities always comes in future. Learning is a continuous process so keep observing market for future opportunities.
Decide on profit percentage (targets) and strictly follow the levels – In bull market, the best way to decide on where to stop on fresh buying and start booking profit, is when Z category stocks start trading higher than A category stocks. Periodic profit booking is always recommended when you are not sure about future trends.
Don’t try to time the market, Equity market creates lots of opportunities every day. Even when market it trading all-time high, we still have good opportunities to get into some sectors. Keep reading about companies and compare with the industry competition and Micro and Macros.
Buy when everybody is selling and sell when rest of the world is buying.
Don’t get emotional about your positions and strictly follow targets and stop loss. Because if you keep carrying bad equity and keep averaging it, you will never earn money in stock market.
You can earn decent returns in stock market if you follow basic discipline irrespective of your investment / trading experience. In my opinion we have made equity investment so complicated over period of time that new entrant tries to get to advance strategies in initial time and the reason most of them go away from market in very little time.
Best of luck and Happy investing.
Views are personal: The author Prashant V Wagh is the Founder & MD of Goldenbulls Wealth Management Pvt Ltd
Disclaimer: The views expressed are of the author and are personal. TAML may or may not subscribe to the same. The views expressed in this article / video are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you.
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