"In investing, what is comfortable is rarely profitable." - Robert Arnott

One must invest in the stock market to build wealth in the long run. Many investors beat the market returns every year and earn up to 100% of their investment. They made such huge returns from the market because of their huge experience. Investing in stocks is an excellent way to build your wealth. Due to the volatility of the market, stocks are a good investment for long term investors.

One must grab complete knowledge about the stock market so that informed decisions can be made by investors regarding their investments. The best way to start investing in the stock market for beginners is that they must be familiar with the concepts of the market so that they can stay firm in a volatile market. It can be an intimidating process for people who have never invested in stocks.

Stocks are not like certificates of deposits, savings accounts, money market funds because your principal value can rise and fall sharply. If you do not possess control over emotion or enough knowledge about investing in the stock market, then there is a greater possibility that you will lose most or even all your investment capital. That is why it is important to learn how to invest in the stock market.

Learn to Invest in the Stock Market

1. Set Your Goals

Before going for investing, one must be aware of an individual’s financial status and whether you are capable enough to accommodate the new activity. Your financial goals include everything from debt to your income, to your household budget. One must organize the individual finance to meet end goals. Your employment or source of income helps you to stay invested for a long period.

You must start investing by asking yourself one question that why you want to start investing? Answer to this question will help you stay invested as per your requirement because investing only makes sense when you stay invested for the longer-term. You must not invest the money if you are planning to have the returns on your investment in days, weeks, or months because investing is a marathon and not a sprint race.

2. Start savings for your Investments

It is always advised that one must first clear all the debts before investing. One must never invest money that one cannot afford to lose. If you are investing money in stocks, then you also need to make sure that you keep some money aside which is free from any risk. One must first focus on savings before starting to invest as saving money builds a roadmap for your long-term investment goals. Even savings of Rs 500 or Rs 1000 per month will help you in reaching your goal of long-term investment. A cash reserve in case of bad scenarios will help you keep invested else you will take out the money from investment at the current market price to meet your needs. 

There are two main purposes of a cash reserve.

*It acts as an emergency fund in case of financial emergencies.

*Helps to avoid panic in case of sudden dive in your investments.

3. Learn to Earn

We do not expect you to be an expert on Stock Market to make your investment decision but certainly want you to know about the functioning of the market and factors that influence the market before you invest your hard-earned money in the market. If you enter the market without knowledge, then there is a high chance that you might make some bad investment decisions that will leave you with bitter taste regarding investments in the stock market. You must learn the famous techniques of stock selection such as fundamental analysis and technical analysis. When you will start learning then you will be able to make informed decisions and can tackle the bad situations.

4. Start at your own pace

As stated earlier, Investing is a Marathon and not a sprint race. The right time to invest is now as no one can time the market. You can start small and gradually increase your investment with an increase in your experience in stock market investments. You must find all the best options available with you and for this purpose, you must do your research. Slowly and steadily with an increase in your investment will lead to more experience and a better understanding of the stock market. This will help you build your portfolio of stocks that are chosen by you as per your investment goals and risk appetite.

5. Avoid Leverage

Before avoiding leverage, first, understand what is leverage? Leverage in simple terms means borrowed money which is given to you by your broker to execute your strategy in the market. In your trading account, the margin is provided to you by your broker or bank to buy stocks and this leverage of money varies broker to broker. Leverage sounds awesome tool when you are making money from the market, but it will lead to disaster if you are losing money in the market and Leverage can wipe your account completely with one wrong move. Leverage is neither a good nor a bad tool. Leverage is best used when you are consistently generating huge profits from the market and confident about your decision-making abilities. Therefore, limit your risk in the starting phase and then take risks as per your risk appetite.

6. Avoid News based Investments

You must avoid the herd mentality that gets influenced by external news that you got from the news channel, neighbour, relatives, or friends. Always do your analysis before investing in any stock or commodity. There exist chances that you will invest in stocks in which investment is made by your near and dear ones. This tendency is followed by a lot of investors but in the long run, this strategy backfires if an investment decision is based on influence and not on analysis. If you do not understand the business of the company, you are investing then you must avoid such investment.

7. Control your Emotions

Most investors suffer losses because they cannot control their emotions to govern their decisions. For example, a lot of investors sold their good quality stocks at an extremely low price instead of buying more good quality stocks in the pandemic situation. An investor who is not influenced by the emotions would always assess the data and facts before making any decision. Emotions will let you destroy your well-diversified your portfolio and your gains will be wiped. Controlling emotions will let you last for long and create wealth as per your goals.

8. Diversification is the Key to Success

There is a famous saying in the stock market which says never put all your money in one stock. One must create a well-diversified portfolio that supports individual goals as well as minimizes your risk. Even if some stocks underperformed as per your expectations then only a well-diversified portfolio will help you achieve your long-term investment goals. One must make sure that they do not over diversify their portfolio as it will yield fewer gains. Most seasoned investors buy stocks on mere speculation that overexposed their investment portfolio to one sector. If that sector suffers due to any reason, then your entire investment would be at risk. A well-diversified portfolio has outperformed the market returns in the long run.