Investing in stocks is no longer a complex or daunting activity; with the advent of technology and digitization of financial activities investing has led to a boom in investments in the stock market. Setting up a trading or Demat account has become a speedy and effortless process, and within minutes you can access the online stock market, whether you are abroad or in India. However, if you are just starting out, you might benefit from a few pointers. Figuring out your goals and strategy as an investor can be tricky. Read on to know a few things to keep in mind while investing in stocks in 2021.
1.Outline your financial goals
Identifying your financial goals is the crucial first step when it comes to stock investments. Without a clear plan, figuring out your investment strategy can become very challenging, especially in a market that is saturated with investment opportunities. You need to set certain goals, so you know where to enter and exit, how long to retain the investment and how much to invest.
2. Know the difference between Value and growth investing
As an investor, you should know whether you are a value investor or a growth investor.
Value investors go for stocks if they see intrinsic value in the company’s business. Thus, investing in stocks requires a thorough analysis of the company’s financial history, structure and performance. This in-depth analysis enables investors to take up the stock when it’s trading below its true value or price. Since the research of the company’s fundamentals indicates its future performance and trends in the long term, investors hold on to the stocks till they hit the price they have kept in mind as the target. As the stock has been purchased at a lower value, there is a lower chance of loss even if the company underperforms, and if it performs well, it’s great news for the investors. Large-cap companies are a good option for value investors.
In contrast, growth investors tend to take a more aggressive approach. Focusing on younger companies that are still growing, growth investors are interested in capital appreciation and the potential of a new business. This can be more of a gamble, as some companies may fulfill their potential, in which case the investment will pay off big time. However, if it sinks, the investors stand to lose their whole investment.
3. Know your risk appetite
That brings us to the critically important aspect of risk and risk appetite. As you may already know, investments in the stock market and even the online stock market are not always reliable or guaranteed methods of wealth accumulation. There are certain risks involved, and you need to know exactly how much you can afford to lose as part of those risks. Once you have figured out your risk appetite, you can zero in on the investments that best suit your needs. You can also diversify your portfolio by investing in different options or stick to one type of security, depending on your risk tolerance. For those looking for safer short-term investments, debt instruments are a good option. Gold, equity mutual funds and safe stop options are recommended for long-term savings goals. If you are a more experienced investor, commodity trading, F&Os and day trading hold a lot of opportunities.
4. Age is a factor
No matter who you are or how old you are, it is never too late to begin investing in stocks. However, your age does influence which asset classes you need to pay more attention to. If you start while you’re young, you have more time for your investments to mature and reach their full potential. If you are an older investor, short-term instruments that are safer are recommended as you can exit quickly once you reach your financial goals.
5. Long-term investments, day trading, or both?
Your financial expertise and goals determine how long you want to retain investment and if or when you want to trade. Financial institutions, hedge fund managers and professional investors tend to go for arbitrage trading, day trading, and investing in stocks from abroad. With time and practice, your growing expertise as an investor may also allow you to consider day trading. Remember that having the liquidity for this domain and thorough research are still key in order to make the most of any kind of investment, including day trading.
Know your capacity, knowledge, goals and risk appetite as an investor well before investing and make sure you know your stock investments just as thoroughly. Investing in stocks in 2021 is easier than ever. You can invest in the online stock market with the click of a button via online platforms and mobile apps, and use various digital tools to get real-time updates on the market, price alerts, advice from experts and stock watch lists. With patience and dedication, your investments will bring good returns. Apart from investments, if you wish to trade stocks more regularly, online stock trading is now at the click of a button away!
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