In recent years, the number of share market investors in India has increased manifold. However, to become an expert, investors must employ some strategies and techniques to dominate the share market. After opening a Demat account and a trading account, investors must familiarise themselves with the intricacies of the market as well as the risks involved.
Even with the risks associated, the share market is still one of the best mediums to grow wealth if utilised wisely. Discussed below are some tips for share market dominance.
How to dominate the stock market and multiply investment returns?
Here are 7 expert strategies that investors can leverage to multiply their wealth in the stock market.
Successful investment demands patience
Investing and trading are two very different approaches to making money in the market. Derivative trading and other trading forms require frequent buying and selling of financial instruments. However, an investor needs to hold onto the stocks patiently when he/she invests.
Investments generate returns through compounding, which does not happen overnight. Frequently changing the strategy with every up and down only brings losses and disappointment in the long run for impulsive investors.
Make decisions based on the business, not stocks
When an investor buys a share, they are buying a part of the company’s ownership in Demat form. A stock’s performance, in the long run, is highly dependent on the performance of the company over other factors. So, before investing any money, individuals need to understand the business model of the issuing company and then formulate strategies accordingly.
Invest in funds for better returns
Experts often suggest investors diversify their portfolios to mitigate market risks and generate better returns. Different mutual funds invest in different asset classes, which can also be an investor’s doorway to portfolio diversification without risking much money.
Mutual funds like index funds track different indices such as Nifty and Sensex, dividend yield funds choose stocks that declare dividends regularly whereas debt-oriented funds invest 65% of their assets in debt instruments. By buying units of such mutual funds, retail investors can claim indirect ownership of the underlying stocks and debt securities.
Do not be another sheep in the herd
Most retail investors often tend to buy a stock because everyone else around them is buying it. This strategy might help them make money at times, but it is bound to backfire in the long run.
The rising demand for a particular stock can surely inflate its price temporarily, but one can never know when this emotion will change, and the price starts to plummet. This way investors end up losing money because they followed the crowd instead of backing their judgement with market research and analysis.
Invest according to the risk appetite
Different financial instruments in the market carry different levels of risk. So, before an investor decides to add a share to their Demat account, they must find out how risky it is. It usually depends on the background of the company and the industry it operates in.
For example, penny stocks are one of the riskiest shares as they are issued by companies carrying very low credibility. However, if they happen to perform well, investors can generate very high returns from them. So, before a person invests in such shares, they must know how much money they can afford to lose.
An investor’s emotion should not override their judgement
Greed and fear are two of the most prevailing emotions in the market. Seeing their investment’s value turning red in their Demat account instils fear in the investors and they want more when it is green.
Stock prices are bound to fluctuate, and one can never predict the highest peak or the bottom line on a stock’s graph. However, what an investor can do is research and make informed decisions. Investors should never let their emotions cloud their judgement because this is not the correct approach to navigating the stock market.
Keeping a close eye on the market updates
A person must review their holding in their Demat account from time to time. Several relevant updates and events can lead to price fluctuations and as an investor, they must be aware of such changes. Not just the operations and news directly related to the company, but several global events can also impact the price in the market.
Irrespective of whether an investor is a beginner or an expert, incurring losses is not entirely avoidable in the share market. If they have securities held in their Demat account, there would always be a risk factor associated with it. However, with the help of proper market research and study, investors can mitigate those losses and generate wealth in the market.
A new investor who cannot put in too much time for research can always seek help from experts. Investing in the share market is a skill that can be sharpened with years of practice and knowledge.