The share market can be very unpredictable at times. People make or break their fortunes in it. Therefore, to tread in the murky waters of the share market you need to move with caution. In this article, we will share with you some valuable share trading tips that can help you become a successful share market trader and investor. So, let’s get the things rolling. We will first know what is a share market and how it functions before we give you our share tips.
A share market or a stock market or a stock exchange is a place where shares of public limited companies are bought and sold. A public limited company raises capital for its operations from the general public. If you own shares of a certain public company, you partly own it and can trade its shares on the stock market.
Now that we have understood two basic terms about shares, let’s start with our share trading tips.
You should have a proper plan in place:
Before you invest in the stock market, ask yourself these basic questions;
Why do you want to invest in the share market? What are your goals?
Do you know the fundamentals of trading in the share market
Will you be a day trader, buying and selling for short term gains or an investor with the long term in mind?
What are the risks associated with investing and trading in the stock exchange?
What are your expenses?
These questions will help you in setting up your path, knowing your limitations, and achieving your ultimate goals.
Start with small:
It is always a good idea to start with a small capital instead of investing heavily. As a rule of thumb, you can invest in the stock market after setting aside money for the following;
Your monthly expense
Emergency funds for healthcare etc.
for education, entertainment purpose
Interests or loan repayments
You can invest the remainder in the share market.
If you are new to the stock exchange you must study it thoroughly and understand how it operates. Seek as much knowledge as you can. You can browse online for useful resources on this, consults friends and professionals, and gain insight from any other sources. You can hire a good share market advisor who can guide you on share market tips against a small fee. Here’s our list of important things you need to learn if you want to be a successful stock market investor.
Technical terms & metrics: When you enter the stock market you will hear various words, phrases, and terms that might seem alien to you. For example, terms like bullish, bearish, blue chips, IPO, etc. are part of daily parlance in the world of stocks. You should know their meaning and interpretation.
Likewise, you should know how to see and analyze a company’s financial statements. What are the financial metrics that can help you whether to buy or sell a company’s shares? These may include return on investment (ROI), earning per share (EPS), compound annual growth rate (CAGR), etc
Stock selection: While selecting what stocks to buy, look for companies with good business standing, and higher dividends. These are called blue chips and are always in demand. Do not go for sectors that are currently thriving but don’t have sustainability. Similarly, do not jump on low-priced stocks. These are priced low for some reason. Consider all factors and make a prudent economic decision. By reading the share market section of the newspaper you can get a lot of share recommendations.
Self-financing vs third party financing:
If you do not have funds but still want to invest in the stock market you can do so by taking a loan from the bank or the brokerage house. Usually, a loan for up to 50% of your investment plans can be arranged. For example, if you want to invest US$5,000 in the stock market, you can get a loan for US$2,500 for it. You need to beware and take a loan only when you are reasonably sure that your investment in stocks will pay off handsomely enabling you to pay back your loan and earn some money for yourself too.
Self-trading vs third part trading:
If you have the required knowledge you can easily trade-in shares sitting at home or in your office. Everything is online these days. If on the other hand, you lack the expertise to trade on your own you can hire the services of a broker. A broker is like a share market advisor. He will advise you what to buy and what to sell and when it is right to do this. He will give you valuable share market tips. He will of course charge you commission for his services.
Before investing in the stock market understand and know your level of risk tolerance. Simply put, your risk tolerance is your level of comfort or anxiety in an unfavorable situation. It is mostly inbuilt but factors like age, perception, education, and environment, etc. influence it. If your risk tolerance is high, you can likely make bigger decisions with higher risks and consequently higher returns. Your investment decisions in the stock market depend on your level of risk tolerance.
Anybody would advise you not to invest too heavily in one company or one sector in the stock market. It makes sense too. It’s among the popular share trading tips andit makes sense too.If the company or that sector suffers losses, you will incur heavy losses too. But each coin has two sides. By diversifying your investment portfolio into different sectors and different companies you have to be vigilant of the current trends impacting them. It can sometimes get difficult. So, a balanced approach is advisable where you diversify but to the extent that you can keep track of your investment portfolio.
While doing investment in shares make a thorough analysis of the situation and do not go for impulsive buying or selling. It could result in a loss. We provide you some share market tips on buying and selling.
Share trading tips for buying: You should know why are you buying shares of a particular company? What is it that you find good? What are your expectations and will you hold the investment for long or short term benefits? Weigh your buying decision on credible metrics. Study the previous financial statements of the company. Work out important ratios and also outline the risk factors and how you will cope with them.
When it comes to selling you should know why are you selling your stocks? Is it because you planned to sell it after some time? Do you believe the company is losing value? If so, what are the reasons? Do you expect some change in the way the company does business or a major policy change by the government will affect the company’s standing? There could be many reasons for selling and yours should make good economic sense.
In a nutshell, we can say buy at the right time and sell at the right time. You should know the real worth of your share. Do not always sell a share when it is hitting low if it has the potential to rebound it will. Panic buying and selling are not an option. This is one of the important share tips.
In a rush to make large profits many investors make this lethal mistake of overtrading. They overstretch their limits and their resources. This puts them in a very precarious position and when the crunch comes they lose everything. So, always be rational and do not chew more than you can. Greed is your worst enemy, know this, and do not succumb to temptations.
Like we discussed in the beginning that you should know whether you want long term benefits or short term gains, while the choice is yours we, however, would advise you to stick to long term. Investing in stocks can reap huge benefits in the long run. You can not only earn dividends but also sell shares at a premium. Seek share recommendations from experts and invest in them for the long term.
Another important thing to remember is to be realistic with your stock market plans. Do not expect miracles to happen overnight. You will be rewarded in due course. Patience and perseverance is the key. Also, keep the expectation of profit margin at the lower level. Markets can tumble and go awry. The best estimations can go wrong. So, always account for such unforeseen eventualities.
Investing in the stock market is not for the squeamish. Expect crashes and meltdowns. They happen and test your nerves. Do not get panicky under such circumstances and maintain your composure. Stress won’t help you make things better. Just wait for the things to turn back to normal. Do not try to compensate your losses by taking high-risk decisions that you are not familiar with. It is wise to adjust your investments according to changing market trends but do not do it in a rushed and haphazard manner with no plan in sight.
Make a balanced investment portfolio
You should always maintain a low, moderate, and high-risk investments. Play it safe with low-risk investments and invest in them. You can study the market and know how to get low-risk share recommendations. For others make a detailed analysis and invest moderately in them. Make a plan for what you expect from these investments and when will you would like to realize them. They are likely to benefit you more in the long term.
So, these are some of the share tips that we think can benefit you if you want to earn handsomely from the stock market. You have to remain focused, patient, and determined in your efforts. Avoid making rash and illogical decisions and keep an eye on the emerging and changing market trends. You will taste success if you keep these important aspects in mind while trading in the stock market. You will be your own share market advisor.