You must have heard about stock markets and share markets, and how people got a huge profit margin by investing in it. However, there are certain things that you should know before you decide to invest in shares. First of all, what is share market? A share market, simply put, is a place where you
You must have heard about stock markets and share markets, and how people got a huge profit margin by investing in it. However, there are certain things that you should know before you decide to invest in shares. First of all, what is share market? A share market, simply put, is a place where you can buy and sell the shares from different companies. It certainly can be very profitable, but here are some things you need to keep in mind.
- YOU CAN NEVER BE COMPLETELY SURE.
As lucrative as they sound, stock and share markets have an extremely high-risk factor. This means that, if you invest in it, you cannot be certain about how much profit you will make or even if you will make any profit. There is absolutely no certainty. You can plan as much as you want, but it will never be predictable. You can never catch the tops and bottoms of the market. If you want to buy the stocks when they are at the bottom and plan to sell them when they are at the top of the market, know that that can never be a surety. You have to play with the odds, but don’t forget that the market might turn at any moment.
- LONG-TERM INVESTMENTS ARE OFTEN MORE PROFITABLE.
It has been seen that over a decade or so, the market rate grows at a rate of about 7% a year. However, this is just statistical data that has a strong tendency to change. There are lots of up and down movements, so you can never be sure. Regardless, due to this very fluctuating nature of the share market, investments over a short period of time tend to give less profitable returns. An investment will mostly yield substantial returns over a period of three to five years. Hence, it is always a better plan to invest in the stock market if you are planning for some long-term goal, like retirement.
- ALWAYS LOOK FOR DIVIDENDS.
Dividends are like interest in a savings account. This means that you get paid regardless of the stock price. It is always wise to look for stocks with high dividend rates. It does not make you completely immune to the decline, but it certainly offers some amount of safety. It is also an indication that the company actually has enough cash if it is paying out dividends. Dividends ensure that you keep getting money and you don’t have to sell your shares.
- HAVE THE BASIC KNOWLEDGE ABOUT WHAT YOU ARE GETTING INTO.
It is more than unwise to saunter into stock markets blindly, thinking that you will learn along the way. It is completely necessary that you possess the basic idea about the shares you want to buy, and also about the workings of the stock market in general. Don’t get into investing in the stock market because everyone you know seems to be doing so. Get into it because you have a certain financial goal that you wish to fulfill. Always keep your financial goals in sight while investing in something new.
- INVEST ONLY WHAT YOU CAN AFFORD TO LOSE.
It cannot be said enough that it is an extremely risky market. Only invest the money that you have a surplus and can afford to lose. Never borrow money to invest in the stock market, hoping that you will pay it back once you make a huge amount of money through it. There is a very high chance that you will lose all your money and go bankrupt trying to settle your debts. Decide your own risks considering all the factors that affect you: your financial condition, age, long-term plans, if you can afford to lose the money, etc. It should be a very well- thought and calculated decision.
Always keep in mind that stock market is only one of the many options that you can invest your money in. Never believe anyone who says that it is the only option. However, if you do decide to do it, be cautious and always be logical about it.