Want to Make Money From Stock Market? 3 Ways How
We have been told to invest in mutual funds and stocks for the longest time. Investing your money is one of the best ways to increase your wealth. We have seen the likes of Warren Buffett and Rakesh Jhunjhunwala and always wondered how they cracked the code of success because no one tells us the intricacies of the stock market and the ‘How’ associated with all of it.
Jimeet Modi, investor, CA, and founder of SAMCO Securities, recently came to my podcast, Figuring Out. Here’s a few things I learned about investing in the stock market.
1. Make time your best friend
When you are investing, you cannot be impatient. There will be good days and bad days. You have to push through the bad days, to get a good return. ‘Buy-and-hold’ is a policy of the share market as old as time. Why? Because you need to wait to see where this is going. Every industry has a time when it’s most profitable and a time when it is at its lowest. Once you are a pro-investor, you can identify the pattern and invest accordingly. When just starting out, it is best to research and wait and see what’s happening before taking any drastic decisions.
It is best to avoid frequent trading, at least initially. Buy a few stocks and hold on to them for an extended period, at least a minimum of three years. You can never predict the stock market. So if you are frivolous with your investments, there’s a likely chance that you will lose your money. And when you are in for the long run, you are also in to see the best days.
2. Reinvest your dividends
What are dividends?
They are periodic payments that a company gives you based on their profits.
Dividends may seem negligible, considering the time and effort the stock market takes. But they will be useful in compounding your money faster. Instead of spending it, reinvest, and you will get higher returns and a thorough look at the market’s history will tell you so.
DRIPs (Dividend Reinvestment Plans) are offered automatically by most brokerage companies. You can opt for that and secure the maximum chance of higher returns.
3. Choose the suitable funds
When we sign up for investment, we hear others’ advice more than our gut feeling. It’s best not to follow the herd blindly. Figure out which funds and individual stocks will work the best for you. You have your own objectives and trading methods, making it crucial to consider your circumstances before making a final decision. Consider how the fund or the stock has been performing for the past five years. Has it been in the news recently? What is the percentage of return etc?
Warren Buffett once said that one needs to be fearful when others are greedy and needs to be greedy when others are fearful. And that is precisely the mantra you need to grow your investor personality.
There are a few other crucial ways, such as diversifying your investment. Don’t put all your eggs in one basket. Share them equally. It’s one of the most reasonable ways to save your hard-earned money. Even if one stock falls and you incur a loss, you will have other options to fall back on.
For more such investment tips, tap here.
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