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Safe Ways to Invest in the Stock Market

From the word “go”, you may think, as many investors do, that there is no safe way to invest in stocks. Well, that’s not the truth as stock market trading and investing has proved fruitful for many investors in the past, and continues to do so. Investing is a good way to put aside wealth while you get busy with your life, and get that wealth to work in your favour so you can enjoy the rewards when you require them.

One of the key ways to invest today, and one which is becoming popular by the moment, is to turn to the share market. India has people of all ages and in all stages of life making investments in the stock market. With this huge population willing to put their money into stocks, you may consider it a safe enough investment asset. The idea of any investment, for any investor, whether investing in stocks or any other asset, is to minimise costs and maximise gains. So, are there safe ways to invest in the stock market? Let’s find out.

Think of Risk

For several investors, the anxiety that comes from the thought of the loss of money can be overwhelming. This is rampant where stocks are concerned in the stock market today. Fear keeps investors at bay, and some may almost venture to online trading platforms, only to back off. Some investors have been known to open a demat account online, and never use it as they were too apprehensive to try investing in stocks. However, if investors knew how to systematically go about investing, they would see that you can be safe with your investments in the stock market. As Warren Buffet rightly said, “Risk comes from not knowing what you’re doing,” but if you do know, then you can effectively mitigate your risk quotient.

A Little Goes a Long Way

In stock market trading and investing, it is advisable to begin your investing activity with a small amount of funds. It's possible to start with as little as Rs. 200,as it all depends on how much you are willing to risk. What starting with a little will teach you is how to gain experience first, and then use this knowledge to invest more. When you begin with a little money, you can afford to make mistakes and not feel the pinch much. This makes you less fearful and with no stress, you are able to focus better. The purpose this serves is to learn from your mistakes. For instance, a 10% loss on Rs. 500 amounts to much less than the same amount of loss on Rs. 5,000. Give yourself at least a year to invest with small amounts.

Research the Companies You Know

Purchasing stocks means that you are buying shares of a company. Consequently, depending on the amount of shares you buy, you become an owner of a portion of the company whose stocks are purchased. Most businesses have stocks, so if you are interested in certain companies whose shares you want to invest in, you should research these well.

You may have heard of well-known businesses through any source, and you can do some research that tells you about the stocks of the company and how they are behaving in the stock market today. For instance, you may have a Xiaomi smartphone. You can start by doing some research about Xiaomi as a company. Look at the industry that a company belongs to. Is it going to do well in the future? Is it in demand now? How have stocks of the company performed during the last few years? These are some of the questions that require answering during your research. Again, relying on the stalwart Warren Buffet’s advice, “Never invest in a business you can’t understand.”

Search for Profitable Stocks

It is possible to know about companies that are making a profit. In turn, these are the companies whose stocks should be invested in as the stock is bound to be stable or go up. Businesses that are losing money are clearly bad prospects to start with, even if they are big name organisations. How do you know if a stock of a company is losing money? There are easy ways to find out. All you have to do is to search for a stock on the internet, and typically a chart will show up. Locate the P/E ratio. If this shows as more than zero, it means the stock is making money. If there is a dash against P/E ratio, the stock is losing money. While trading in the share market, India and most of its investors fail to put in the work involved in sound investing, and hence, fail to see returns.

A Long-Term Focus

In the stock market today, you may experience twists and turns and wonder why this happens. The same stock that was up last week, may have fallen a notch or two this week. The thing about stocks is that their very nature makes them volatile. In the short run, you will see many changes and shifts in prices. However, as any company sees significant growth, the stocks will hit the roof. For instance, when Facebook was initially on the stock market, its shares saw multiple falls in the first year, almost by 40%. Now, it's one of the hottest shares on the planet. You cannot “get rich quick” with stocks. The long term bears more rewards in the stock world.

Wisdom Leads to Safety

When you first open a demat account to invest in stocks, many folks may rush to advise you how to go about your investment. You can always listen, but take action according to your own requirements and reasoning. Being safe doesn’t have to mean avoiding the stock market altogether. You can be prudent and patient, taking risks that are calculated and wise. It's a good idea to invest safely through a user-friendly platform, and one that you get with Motilal Oswal can help you with tips too. Handy hints can guide you and you can evaluate these against your own needs.