Data from the Securities and Exchange Board of India (SEBI) reveals that the demand for demat accounts is surging. Between April 2020 and April 2021, 10.7 new demat accounts were opened in India. Just like the rest of the world, most of the demat accounts were opened by millennials and young investors.
While the new demat account opening process is quick, straightforward, and convenient, many new investors do not know what to do after that. After all, trading and creating an investment plan does require more than a demat account. So, here are a few things that you should consider as a part of your investment strategy plan.
Your Reasons for Investing in the Indian Stock Market
Before you go to do your grocery shopping, you must be making a shopping list and calculating the expenses you will have based on that list. Likewise, when you want to invest in the stock market, you should have a goal in mind so that you can then create strategies to accomplish that goal.
So, before you begin your investment journey, you need to figure out whether you want to trade or invest or do a little bit of both. While many people use trading and investing interchangeably, here is a difference. Trading involves buying and selling shares by taking advantage of the fluctuations in the stock market. On the other hand, investing will see you entering mutual funds, bonds, and SIPs. Trading comes with a certain amount of risks that you should be willing to take on. So, spend time learning about trading and the different strategies employed by traders to create financial wealth.
Understand the Basics
Once you know how to create demat account, the next step is learning the basics. When a child studies in a school, the key to excelling is to get the basic concepts right. Similarly, before you enter the stock markets, you need to learn and understand the nitty-gritty. Do not be greedy and blindly follow some expert or tips from a friend. It will not help you reach your financial goals.
Take time to learn the workings of the stock exchanges, how to use the broker’s terminal to buy and sell stocks and other financial instruments, and how to find the right investment opportunities. So, learn how to do technical analysis using trends and charts so that you can better understand the market.
Create an Investment Strategy
After you have learned the basics, it is time to learn investing and trading strategies. These strategies will guide you on your investment journey. You will know what stocks to buy, how many shares you should buy, when to buy the stocks, and when you should sell them.
You should stick to your strategy as long as possible. It is prudent to remember that while most investment strategies have a win-loss ratio of 50%, you will have more wins than losses, allowing you to be profitable in the long run. And, that is exactly what you should look for when creating an investment strategy.
Create an Emergency Fund
When you want to invest, always use money that you are ready to lose. Remember that most investments will pay off in the long run and until then you should have money for your daily life. That is why you should always have an emergency fund that should be designed to protect your portfolio should the need arise.
Most investors set aside savings for three to six months as an emergency fund, and you too should do the same. Again, it is imperative to stress that you should be willing to lose this money if you are entering the stock markets.
When you invest, it will take time to show results. Hence, you should be patient and extremely disciplined. Make sure you stick to your investment strategy and spread your risks by diversifying your investment portfolio. Look to add different stocks and financial instruments so that if one performs badly, the other assets will help cover it.
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