Buying shares from the share market is not difficult. The difficult thing is to choose companies that are constantly ruling the share market.
This is something which most people are not able to do, and hence, investment in diversity, which is a mix of low-cost index fund and exchange-traded funds, are a smart and long-term strategy followed by an average investor.
The below given 5 points will help an investor fetch better returns from the share market:
- The emotions should be kept at the door – IQ and success are never related with each other in investments; what one needs is the temperament to control the urge, which generally leads to trouble in investing. This was said by Warren Buffet who has been a role model for investors looking for long-term wealth building returns. Buffet referred to investors who had allowed their heads rather than their guts to make investing decisions. In addition, trading over actively has always triggered emotions that hurt the portfolio returns.
- Companies should be selected rather than symbols – It is easier to forget about the stock quotes that keep crawling along the CNBC broadcast, but stock picking should never be an abstract concept. One should always remember that once you buy a stock, you are a part owner of that company. One should know how the company operates and its place in the industry along with the competitors and long-term prospects so that they can know if something new is about to come to their portfolio.
- Plan for tricky times – Investors also get tempted at times to change the status with the stocks. However, the heat of moment decisions usually leads to investing gaffe, which is buying high and selling low.
– Why buying the stocks – One should know the attractions of the company and the future opportunities of the shares along with the expectations one has with them. One should know the factors that are being used to judge the company’s progress and the pitfalls so that the game-changers and setbacks can be identified.
– Why selling the stocks – Many times, there are reasons to split up. One should know all the reasons that could force them to sell the shares. However, the fundamental changes, which can affect the long-term growth of a business, must be known, like losing a major customer, wrong decisions taken by the management, and so on.
- Positions should be built slowly – An investor’s superpower is time and not timing. The successful investors always buy businesses to be rewarded, which might include dividends or share price appreciation that might happen over years or decades. Which means one should take time in buying stocks.
Dollar-cost averaging – It means investing a fixed amount of money at regular intervals like once in week or month to buy shares when the price is down and fewer shares when the price is high and, hence, even outs the average of the price which the investor pays.
- Overactivity and trading – One should usually check stocks once in a quarter when they receive the quarterly reports. Keeping a regular eye on the share market can lead to overreacting to short-term events, thus removing the focus from company’s values and initiating activity when there is no need of any action.