10 Ways To Become Successful In Stock Market Investment

Successful and renowned stock market investors such as Benjamin Graham and Warren Buffett have made a profit by adopting certain investment strategies. In this blog post we are going to look at 10 ways for such a successful stock investment. Following these approaches will make you a successful equity investor and will eventually make you rich.

10 Ways to become Successful in Stock Market Investment

Decide on an Investment Strategy and stick to it

Let's say an investor plans to invest in equity-oriented mutual fund schemes through a balanced investment plan (SIP) system. He should not change his investment strategy under any circumstances when the stock market continues to fall. That is, SIP investment should not be stopped. The market crash is the right time to continue investing in SIP as more units will be available. Moreover, on average, more units are likely to be available in the long run.

Another investor has decided to invest in 50:50 debt market-oriented schemes and stock market-oriented schemes. At this stage he sees the rise in the stock market and changes this rate. He changes it to 30:70.

This means he has now invested 30 per cent of the amount in debt funds and 70 per cent in equities. As a result, his risk has increased tremendously and his chances of loss have also increased.

In fact, in order to bring the portfolio back to a predetermined asset allocation ratio when the stock market rises and gives good returns, one needs to reduce stock market investment. That is, you have to sell a little of the shares that are on profit and invest in debt market-oriented schemes.

Don't change your investment strategies intermittently. Once you have decided on the best investment strategy for yourself with foresight, you need to continue to travel through it.

After deciding the investment strategy, do not make a difference in the investment decision every time you invest. Doing so would result in losses instead of profits.

Also See: Which SIP Frequency is Best? Daily/Weekly/Monthly SIP?

Explore and Invest On Your Own

It is not advisable to take a decision on investing in stocks, mutual funds just by listening to the advice of your neighbour, friend, relative or the media or your stock broker. Also, buying shares on the basis of tips is equivalent to gambling.

When investing your hard-earned money, be a fully informed investor. Also, you need to make sure that this investment will help you achieve your financial goal. The right investment decision can be made through research from various sources.

Don't be afraid of short-term fluctuations

If you want to be a successful investor, you need to understand that it is futile to worry about the temporary loss caused by the short-term volatility of the stock market.

Investing in good corporate stocks and equity funds ensures the quality of your investment mix and an increase in capital value in the long run.

Avoid Investing in Penny Stocks

There is a common misconception among small investors that it is better to invest in penny stocks, which are cheaper than investing in high-value stocks. That is, they think they will get a higher number of shares because of the low price. They think that even if the price goes up a little, they will get more profit.

There is a greater possibility of a fall in the price of penny stocks rather than going up. The reason is that companies like these are basically very bad companies. It is necessary to look at the background of the company before looking at the share price.

Also Read: How to Invest Money in Stock Market

Exit Stocks that are at a Loss

Investors generally get out of profitable stocks easily. But they will not come out of the stocks that are in losses so easily. The price of the stock will rise again. They will be at a loss for a long time on the basis of the expectation of profit. It is very wrong to do so.

Selling shares of companies that don't perform well quickly and exiting and investing in other well-performing company stocks can help you to make a profit.

Think before starting an Investment

Even a good company stock purchased at the wrong price can be a bad investment option. It will take a long time for the stock to come to profit. Don't always invest the entire amount of money at the same time to avoid such mistakes.

To avoid this mistake, invest in company stocks and stock market related schemes through SIP mode. In case there is a lump sum of money, you can invest it in liquid fund and transfer the investment from it to equity fund in certain months through systematic transfer plan (STP). Also, adopt strategies such as asset allocation, which is divided and invested.

Keep in mind the future development

It is advisable to consider investing in stocks of good companies. However, it would be a mistake to be without warning that small startups may face failure.

Shares of companies with good business strategies and growth plans are likely to give good returns in the long run. Therefore, before investing in a stock, it is necessary to consider not only its current state but also its future growth.

Consider Income Tax Implications as well

Income from equity shares and equity funds linked to the stock market will have to pay higher taxes in the short term.

This means that if these investments are sold within a year, you will have to pay 15 per cent income tax on profits. If you sell for more than a year and make a profit, there will be no tax of up to Rs 1 lakh in the financial year. You just have to pay 10% tax on the profits above that.

Continue to follow the rule

As far as equity-oriented investments are concerned, always make a rule and act accordingly only.

For example, if you have a return of more than 15 per cent on these investments and are planning to exit, then continue to act accordingly. Or if you are a very long-term investor and buy a stock like Warren Buffett and you will continue it for a long time, then act accordingly. Don't mix the two.

Also See: What is the Right Time to Exit/Redeem Your Mutual Funds

Always Invest in the Long Term

When it comes to stock market oriented investments, you should always invest in the long run. You should invest in corporate stocks and equity funds only if you need money for more than five years. If one really wants to become rich, it is necessary for him to be a long-term investor.