What are Investment Strategies?
Stock Markets or rather Sapon ka Bazaar, if can be pearled into a common folk’s life with ambitions. Often deemed as the crush of the working class, this place has been evergreen. It has been defamed, cussed upon and loved by people in the same decade. Such is its beauty that neither a 60-year old nor a 16-year-old can resist its charm. People have both completed and lost their dreams in this place, where the only difference was the approach.
With people either losing their jobs or a significant chunk of their income in the pandemic, they looked for alternative sources of income to push forward with their livelihood and goals. These efforts are evident as the data from the exchange shows that in the past 14 months almost 12-15 lakh new Demat accounts have been opened with several brokers. Youtube statistics show that people from various backgrounds were looking into the stock market and finance channels while many new ones have blossomed in this period. The advisory companies have mushroomed, claiming 100%accuracy and what not. Even a significant population has fallen trap to scams and frauds in this domain, which tells about the popularity.
Learning stock markets is not as difficult as it may seem; developing the mindset to survive in stock markets is very tough. People often misinterpret that it is the strategy that is not working, but, often it is the lack of emotional stability which is the reason behind the loss in the trade/ investment. They need to comprehend how much loss they can bear in a trade/ investment, how much they can invest without cutting on their needs or taking a loan. Stock markets are a tool that will reap income, only when you plug capital into it, so you need to have income coming into your pocket first.
Before starting with the basics of stock markets it is quintessential to understand the rules of the game first then start playing. They need to comprehend first; whether the stock market is the correct investment tool for their goals, it aligns with the risk profile, and will they be able to devote their time to markets along with looking into investments?
If people feel that they will get stuck in any of the above questions or things are not getting aligned, they should look into some different investment instruments like a PPF scheme or Mutual Fund/ Debt Fund/ Arbitrage Fund/ Bond, etc. which simply needs sips every period or one-time investment. If everything is good, and aligning with the requirements then they need to check the eligibility of doing transactions in stock markets. This is a very important crosscheck as sometimes the employment profile of the person prohibits them from being an active participant in particular company stock or the entire stock market.
Assuming everything is okay by now; people should now understand the investment options available in the markets like Indexes, Stocks, ETFs, liquid funds, etc. One of the finest and standard resources for getting acquainted with the basis of these terminologies is Investopedia.com. Though it is a resource in the context of the American Markets, it explains the basic investment terminologies and the instruments in the simplest and easiest of words. Nowadays brokers have started posting informational content on their social media and blogs which is also very relevant.
Now going deep into stock markets if you wish to learn how to invest, you need to understand first that in a stock market investing into a company by taking a franchise and purchasing stocks through your broker are essentially the same thing, even processes are widely different. The stock purchase seems so easy that we often forget that we are investing in a business and we need to assess it fundamentally. Here the fundamental analysis comes into the picture where you need to look into the statements, cash flows, sheets, and ratios to understand how the company is performing through rendering products and services. No one wants to invest in a business that is making continuous losses and has not been profitable for the past few years. Also, no one wishes to risk their major chunk of capital into a small company that is subject to manipulations. The same applies to stocks where the market capital should be more than 7000 Cr INR and the price should be more than 100 INR. Now you may be wondering how to analyze the sheets and the ratios, the best way to is reaching out to an institute that provides you with an share market learning course, as fundamental analysis is a vast ocean and you need to analyze to identify the eligibility and not do research.
Then comes the segment of investment strategies which is dominated by the PE ratio. While the modern approach disregards it, experienced heads loath it. As per us, it is the best tool to proceed into the investment domain by taking a holistic stop loss of the 200 Moving average. The goal of investing is to grow your money along with the company and have extra rewards like dividends, bonuses, splits, etc. by being the stakeholder.
Coming to how can you start trading, you need to understand first that trading is a high-risk high reward segment. You need to identify which kind of trades you can take-
Within a day- Intraday
Buy and Hold for around 10 days- Swing
Buy and hold for more than 10 days- Positional
There are many segments in which you can trade into like Cash, Derivatives like Futures and Options, Commodities and Currency, and yes crypto included. While there are infinite numbers of strategies that are part of technical analysis like momentum trading. Indicators, patterns, price action etc. all are equally profitable if executed correctly. Even a simple comparison strategy of ATP vs LTP will reap you immense profits. All you need to care about and focus on is Risk management, Stop loss, required capital and Risk reward with a very simplistic mindset, devoid of emotions.
One thing which is equally important in this journey is that you need to have your Demat account with a reputed SEBI registered broker. For trading, you may choose a discount broker, but for investing a full-time discount broker is recommended.
We at Goela School of Finance, offer the complete solution to both in-depth fundamental and classic yet simplistic technical analysis, with systems that help you to develop the right mindset to thrive and be profitable in the stock markets.