Tips to survive in a stock market

Trading of goods and services were a basic human activity ever since the beginning of civilizations. They prospered through bringing their produce and skill in the market and selling them at a satisfactory price. But as the civilizations developed, a new model of trading began.

Yes a new model in which the producer put his entity on the market itself to gain capital and share profits in the same ratio. This kind of trade revolutionized the dynamics of an economy. Opening up a new way of getting funds, rather than rely too much on banks, the entities sought to bring new lenders who would not ask for interest but would opt on gaining a share of profit.

The place where these two factions meet is a stock market. Not going deep into explanation, stock market is in itself a money making industry. However, as good it sounds, getting too excited is also dangerous.

There are times when we see the market doing well and also going down. It makes an investor nervous over whether this is the correct opportunity to put money or not.

But fear not readers, Equity Right brings you simple tips to sail the tidal waters of a stock market.

1) Know the sea well

Consider the stock market as an open sea. The various companies listed on the market are ports. Some ports are large and deep, some are medium but yet a good one and some are small, meant for trading in low volumes.

To set sail on your ship (investment capital), it is very important to know the sea well. You should know the name (exchanges), the ports (companies) and their size (valuations), the tides (market frictions), the coastline (market exit), the depth of the sea (market valuation), the directions (indices), and above all your own ship (investment capacity, sources etc.).

Until and unless you know the market well, its history, its trading, its record, its influence, etc, it would be really foolish to set sail (invest) and to think of reaching the destined ports.

2) Confirm the length of your sails 

Before thinking to invest money in shares, make sure you have sufficient amount of capital to sustain your day-to-day livelihood. If you are a salaried class person, opt for mutual funds in capable amounts or look out for companies whose share prices will fit well into your pockets. Don’t overestimate your finance or underestimate the prices, stretch the feet till the length of your blanket, or else you may feel any unexpected chills.

3) The map is the key for navigation

The map, as I would refer to your investment opportunities and stock hunting, is the key to sail on the sea and reach the most desirable port. Navigating the market for the best and secure stocks is a crucial element to survive.

To make sure the map is reliable, look out for company data, personally indulge in research and avoid heeding to just what the television says. A good knowledge of data reading and interpretation is absolutely essential.

4) Tides are frequent, but predictable

The fluctuations in the market are a day-to-day activity. Stock markets never remain the same. So how would you calculate the proper timing to sail? The answer is analysis. Keep track records of all the activities going on. Understand the dynamics of capital markets and update on all the news that will influence the stocks, their valuations, etc. Look for a pattern among domestic and international activities. Once the tides are studied, you can easily predict what may be next or what the options to sail through it, thereby lowering the potential of a sudden hit to your investments.

5) Ports will differentiate in size, value and risk. Choose wisely

 As I mentioned earlier, companies (ports) can be large, medium or small in shares, value and exposure. Large caps usually attract a greater number of investors, hence increasing its market capitalization no less than $10 billion. You can be drawn to such ports, but know this that with greater value, the ability to repay investors should also be enhanced.

Deepwater ports can facilitate good trading but be cautious of their performance. Quarterly profits of all large, medium and small caps effect the markets and hence your investments. Medium and small caps can be generally exposed to greater risk as those are shallow water ports and a threat from tidal currents is possible. However, a middle income investor can look out for small and midcaps to enter the investment arena.