Whether you have been investing in the stock market for a long time or if you plan to do so now due to the poor performance of fixed income, you must bear in thought that investing is not a game, since, in the end, we are managing that saving that has cost us so much to accumulate. Several mistakes are often made when investing, and it is always good to have some golden rules to tackle investing in the stock market successfully and taking share market classes is advisable to reduce the risk of mistakes.
We will analyze five skills that will help you face your adventure in the markets with more guarantees. To have solid and sustainable profitability in the long term, the psychological component is more important than having excellent knowledge of finance or accounting. Not buying when everyone else does or selling out of panic leads people without excellent expertise in the matter to have enviable portfolios. This applies to any financial product, be it stocks, mutual funds, or whatever vehicle through which you usually invest.
Most people who put money in the stock market consider themselves investors, not speculators. However, each time the holding period of a share or a fund is shorter. Years ago, stocks were held for years or even decades, and now the average is less than a year. Undoubtedly, being able to buy or sell with a simple click has helped this increase in operations.
Nevertheless, if you are an investor with a long-term time horizon, it does not make much sense to conclude the short term. It does not matter that the price of a company moves a lot or a little during three months; the company is not worse or better because it has risen or fallen by 10%.
If you have a home, you are not looking at how much it is worth every day. Furthermore, when you invest in the stock market, you buy part of a company or a fund, not just stock. Therefore, even if the price of the stock changes, its value may not.
To be able to invest in the stock market successfully, perseverance is essential. If you start investing and your shares lose value, it is necessary not to stop doing it. If you think that Reliance at 2500 rupees is a good investment, wouldn’t it be even better at 2000 rupees if the company’s fundamentals have not worsened?
The usual thing in the markets is that people enter the euphoria phase (when everyone makes money, you don’t want to be the only one left out) and leave when the bubble begins to explode at a loss.
There is constantly a lot of noise around the markets: analyst reports from your broker, the specialized press, blogs, Twitter, etc. The investor must have sufficient judgment to know what information can be helpful to consider in his investment and whatnot.
You should always think about whether there is a conflict of interest behind that report you are reading, as it is usually the root of many problems.
This same skeptical attitude must be observed when we analyze the information provided by the company itself, especially concerning projections about the future and corporate operations.
Billions of rupees move around the markets, and everyone has the same goal: to make money. Think that the one that sells you the stock you are buying may be an investment fund or hedge fund made up of brilliant mathematicians, physicists, or even an algorithm that operates autonomously.
What have you seen that they have not seen so that they sell and you buy?
It is imperative not to lose that outlook when we are in moments of euphoria with our portfolio with juicy benefits. In the end, the market is cruel to those who think they are brighter than it.
It may even be good that the first operations are not very successful not to lose respect for him. Imagine that you do two functions, and they turn out well by sheer luck due to the frenzy of the market. The danger is that you are encouraged and invest larger amounts of capital that could later lead to significant losses.
It is not necessary to have extensive technical knowledge in the matter to invest in the stock market. However, it is good to have clear ideas and learn from our mistakes.
Interestingly, you write down the operations you carry out, the reason for the purchase, and the sale. In perspective, when you review them over time, you will see where your most significant weaknesses are.
Some people sell too early, others too late, etc. You don’t always earn money for a good trade. You can win it even by making a mistake, but that is not sustainable.