An index is a weighted average of predetermined variables of stocks of few selected companies that serves as a bellwether of the current market scenario. It is an indicator of the market position, of the market trends and in part of the economy. Of the prevalent market indices in our country, the most common among them are the BSE Sensex and the Nifty 50. It should be noted that with the inclusion in the nifty 50 the number of companies in the index now are a total of 51.

Market Trends

As mentioned above, the index is an indicator of the market trends and hence beating the index would mean having your investments move in the opposite direction when the market is showing negative trend. And it will also mean have your investments move higher than the rest of the market when the market is positive. As mentioned above since the index is an average, not all companies will have a drop in the prices of their shares when the market shows a negative trend. Similarly, some companies will gain higher than the gain of the index when the market is positive.

Selecting fundamentally strong stock

The aim of the investor is to identify such companies and invest in them. While this is a highly fluid situation and almost impossible to achieve every single time, one can still aim for a healthy average. The basic necessity in making positive returns and later aiming to beating the index is market research. Your research will help you form opinions that will help you conclude on the companies you’d want to invest in. There is no two ways about this and no easier option, if you want to be a responsible investor aware of your assets.

Information is the key and is needed in bulk to form opinions. One way to outperform is with superior information. But only the insiders have access to such and insider trading of non public information is a serious offense. Names like Peter Lynch and Warren Buffett became household names by being able to pick individual stock from the haystack in front of them.

Other factors

Even after you have chosen a stock and invested in it. And your stock has started yielding returns, a lot of factors still work against you being able to beat the index. One has to consider investment fees and taxes to be paid from the returns of the investments. Another variable that works against us is the psychology of the investor.

A lot of people flock towards the market when the market shows growth and the share prices are going upwards. And these people desert ship when the share prices fluctuate or plummet. In short, they buy the shares at high price and sell them at low price. This behavior cannot result in profits. A sound plan is the exact opposite of the shown behavior. And this plan is how Carlos slim, the business magnate from Mexico became the richest man in the world. But these are few names in an ocean of investors. Most of the investors with all the factors discussed will be practically aiming at ensuring the same returns as their investments before trying to take on the market.

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