The pandemic has brought new and active investors to the equity market. Before investing in the stock market, especially in equities, you must evaluate your risk tolerance capacity and return expectations. Why? Because trading is often affected by the irrational behavior of the trader.
Demat accounts and trading accounts are required for online share trading. A report of SEBI shows 4.9 million new brokerage accounts have been opened during the pandemic. Overall it is a 22.5% increase within a year. There are various reasons for this sharp increase. Mainly, the interest is driven due to deeply discounted options, especially for first-time investors. If you are also going to invest in the equity market, consider the following important aspects of investing in equities that will help you in investing.
Risk Tolerance
Before investing in equities directly, take it as a mandatory task to evaluate your risk tolerance capacity. Avoid pouring savings into equities because there is the risk of not recovering it.
Time Horizon
Generally, long-term trades are safer than short-term trades that keep you safe from day-to-day volatility. If you invest for more than a year, it is a long-term investment. Long-term equity offers a great opportunity to earn attractive returns. Apply strict stop-losses if you are choosing short term trading. Do not trade beyond your risk appetite. If you possess a high-risk appetite, you can think about short-term trading.
Returns Expectation
Risk appetite and return expectations both are inter-connected because the higher the risk higher the profit. Take information-backed decisions to earn expected returns. Whenever you are at a stage where you have achieved your targets exit a stock without any greed.
Diversification of portfolio
Portfolio diversification is necessary to minimize risks and optimize investments. Do not invest all your money in a single option. It is a simple rule of whether to invest in equities or other investment avenues, diversify investments in different sectors.
Demat Account Charges
As a newbie, undoubtedly, you will research the stock market. Research about different brokerage firms. Avoid unregistered stock advisors. Demat account charges differ from broker to broker. There are different charges associated with Demat accounts like account opening charges and Demat account maintenance charges. To reduce Demat charges, choose discount brokerage plans. If you are not an active trader, choose a basic services Demat Account.
How to do online trading successfully
If you are choosing to invest in short-term investments, you should know some tacts to trade.
Start Small
Take a close look at your financial status when it comes to trade. Better to invest small as a newbie that your risk appetite allows you.
Choose the self-help route
No one can advise you better than your own research. Track growth curves and revenue streams of companies. Study the basics of technical analysis. Fundamental analysis provides a straight path towards gains. Company spreadsheets offer a trading edge, read it. At least understand basic terminologies.
Practice Trade
Take real-time market actions. Trade for different holding periods and use different strategies. Analyze the outcome and then stick to a successful strategy that suits your trading style.
Follow trends
Financial markets follow trends. You also need to trade as per trends only. Do not try to time markets.
Be Realistic
Set a realistic financial goal so that you can achieve it and attain confidence day-by-day n trading.
Check the stockbroker credit ratings
Check references online and open brokerage accounts with a broker with a good reputation.
The Bottom Line
Invest and trade as per your financial limits. Never gamble with your savings. Avoid unregistered stockbrokers and advisors.
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