Investors often think they require a secret recipe to succeed and make money. But for most people, there is no big secret: Just adhere to a few fundamental principles, and it will serve you well regardless of where the markets are headed next week or next year. Following are a few tips that can help you get better at investing:
- Recognize why you want to invest in mutual funds –Understand the underlying goal and objective for investing in mutual funds. Are you seeking wealth appreciation (capital gains) or income (dividends)?
- Do thorough research – Research about the company whose mutual fund units you are planning to buy and evaluate if the company is worthy of your money.
- Always keep the big picture in mind –Remember, it is a small world after all. Hence, you must be aware of how the world can affect your portfolio. Everyone from the bureaucrats to the politicians to the citizens can influence the market like a match in a dry haystack.
- Use investing strategies as the experts do – In simple words, how you go about your investments can be just as important as what funds you decide to invest in. Strategies such as limit orders and trailing stops are great tools, and opportunely, today’s technology offers us even more tools to help us protect or grow our capital.
- Consider purchasing in smaller quantities – Buying stocks does not always mean that you should buy mutual fund schemes through a broker and that it must be at least 100 shares. You can purchase stock for as little as Rs500 using programs like dividend reinvestment plans.
- Don’t get too hung up on the daily market volatility – Beginners are too easily influenced by regular market movement and volatility of the markets. Thus, they try to time their investments. Remember, it’s not too easy as it sounds.
- Before chasing new investments, ensure that you completely understand your existing portfolio – Before you start new investments, ask yourself these questions: “Do you have the required money to invest? Is your existing portfolio properly diversified? Are the investments performing well relative to their risk-return ratio and the benchmark? Are the current investment positions meeting your expectations? The answers to these questions will communicate you if the new money should go into the new or same investments.