5 Golden Rules of Equity Investment That You Should Know | Espresso

5 Rules of Equity Investment

Investing in the equity market could be thrilling yet challenging for first-time investors. The stock market is a complex place to delve into, but things might work in your favour if you research well beforehand. Hence, before you think about investing in equities, you need to learn about the rules of equity investment.

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You can make your money grow in stock market investments if you know the technicalities better. So, before deep diving into the dos and don’ts of investing in the equity market, you need to get the basics right. Let’s learn more about the top-selling rules of investment in equity in the stock market.

5 Rules of Investment in Equity That You Should Know

Here are some of the basic rules of equity investments that you should be aware of:

  • Have a proper plan

This isn’t just a coach’s advice, but it is important for beginners in equity investment. First, you must plan to dive straight into the equity investment market. This is important because otherwise, you may face financial losses, that’s imprudent. For first-time investors, it is prudent to have a proper plan in place that solely focuses on their financial objectives. Once you are committed to your plan, you will see that your investment strategy will be aligned with your goals and needs.

  • Keep a tab on your investments

Your friend might be okay with investing and then totally forgetting about the same. But for you, this kind of attitude may not work. So, as a beginner in market-linked investments, it is always advisable to track the performance of your investments. This will also help you rebalance your investment portfolio as per your funds’ performances.

Hence, always try to stay updated with every single piece of news related to financial markets and new schemes to ensure that you are able make use of them properly. If you cannot do so yourself, it’s always a good idea to seek the help of an advisor.

  • Steer clear of herd mentality in investments

You may always have a temptation to take the same path as most of the investors. Rallying behind investors is common for first-time investors. It is also common to follow the hot trends about funds and stocks that you may hear from acquaintances or friends. But do not follow this herd mentality as it may cause losses in your investment portfolio.

  • Keep a diversified investment portfolio

There is a very famous proverb, ‘don’t place all your eggs in a single basket’. And this saying is something that you must remember as an investor. However, this may seem to be a very difficult rule to follow when investing because it’s a natural human inclination to re-invest more funds into the same stocks and funds that have performed quite well before. But, on the other hand, you must also remember that the financial sector is evolving rapidly. What was safe before may not be safe tomorrow. Hence, it's better to explore more options and invest in lucrative indexes to ensure that your financial portfolio is growing and updated.

  • Long-term investment is profitable

When it comes to equity investment for beginners, the goal of earning some quick money isn’t the right thing to consider. Although it may seem quite tempting to make easy profits in the stock markets, you should think long-term. Hence, long-term investments could be the key to building a financially secured future for yourself and your family.

If you are focused on earning profits in the next five to ten years, you will inherently give a chance to your investments to grow and yield better returns. In addition, the long-term investment approach will also keep you safe from knee-jerking decisions as per the market volatility.

Conclusion

All said and done if you follow the rules mentioned earlier of investment while investing in equities. It is important to educate yourself about the knick-knacks of the equity market before jumping into your investment plan. This will give you a better chance of growing your financial wealth. Investing properly will allow your dreams to thrive. All the best!

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Frequently Asked Questions

You can find out about your investment personality by asking yourself these questions –

  • What kind of an investor am I?
  • How much risk can I take?
  • How much capital can I allot?

Answering these questions will help you decide the kind of investments you want to take on, and will also help you to envision your long-term financial goals.

The whole idea behind investing money in the stock market is to create an additional source of income and to create a sizable corpus of wealth for your future. So, if you can follow a few rules, your investments could get better and yield better results. Avoiding herd mentality, diversifying your investment portfolio, and choosing a long-term investment approach are some of the golden rules of investment.

The golden rule of investing that you must always remember is that you should never invest the money that you cannot lose. This is one of the top things that you need to remember when you are investing in equity.

Equity investment refers to investing in the stocks of a company and earning through appreciation of the stock prices and dividends. You can invest in stocks through the stock market.

 

 

Blue-chip companies have large market capitalisation and are considered to be more stable than others. Hence, investing in their stocks could be beneficial for the investors. Moreover, these companies are also the most valued ones in the stock market because they are financially stable and reputable.