Many economists, during the beginning of 2018, expected the market to drop down further. However, the market behaved the other way round, and so far it has performed well with minor fluctuations.
But economists cannot be incorrect every time. Many have predicted a very slow growth for the next five years, and some are pointing to a double-dip recession. In such atmosphere, you cannot expect companies to perform at their peaks. So, the market can be a bit bumpy at times. However, if you have a right investment strategy, and the right approach, you don’t have worry about the rough trends. Here are few tips that will help you get going even in a tough market situation:
1. Be Different, If You Can Afford
Investing in stock market, and making money from it means having the ability to make decisions at the right time. Most of us are told you must invest money in the market when it’s languishing. So, when the market bounces back, the returns are high. However, nobody can be sure about when the market may fall. Waiting is, hence, futile.
The best time to invest in the market is now, if you want to get started. If you are worried about losing all your money, don’t put everything you have into it. Invest gradually, and when the market is down, invest in bigger chunks.
However, if you don’t have enough funds, and you want to start with minimum investment, hang no for a while. In the rest of this article, you will get more info on investing with less.
2. Don’t Overreact
If you are investing in the market, remember it’s not going to be easy. As mentioned earlier, in the beginning of this article, the market may be quite rough this year, and you may incur loss. But that’s a part of your play. The only thing you need to do is not to overreact.
Besides, do not get addicted to your investments. Most beginners, when they first put their money in the market, keep checking the prices every 5 minutes. They call up their broker over and over again. And they overreact too much. You need to understand that if you have invested for long term, minor changes every day (or every minute) would affect your goals.
3. Long Term Horizon
Too much importance is given to short term returns by investors. If you have incurred a loss on a stock for more than a year now, and the money you have invested is for your retirement, which is 30 years from now, do you really have to bother? The longer you are in the market, the safer is your investment.
4. General Rules for Asset Allocation
Diversification or asset allocation is necessary, especially during such an economy. Here are few general rules you must consider before investing your money into the market.
- Some part of your investment amount, ideally 30% should be invested in foreign equities. This will protect you against domestic instability and fluctuations.
- Don’t invest only in emerging sectors. A part of your investment should be into base sectors like oil, metals, infrastructure, fuel, and so on.
- Know your goals before you diversify. If you are investing for your retirement, you wouldn’t want a risky stock. On the other hand, if your goal is to become a millionaire in a couple of years, you must have an aggressive portfolio. Hence, diversification would depend on your risk-taking ability.
Investing in stock market isn’t about become a millionaire overnight. Many people have lost millions, and many have lost literally everything trading in this market. Hence, start small, and invest in a stock only if you are confident about its growth.