If we see the growth in number of people investing in stock markets, including Mutual Funds, it is stupendous in the last two or three years. That reflects the awareness that the stock markets and the media has brought in the minds of people. May be, it is also because of the fact that the the investments made in stock markets, especially in the last three to four years of time frame, has brought tremendous returns, even to the magnitude of 125% in a single calendar year.
So it should be quite predictable that people will be interested in stock markets. Not only businessmen and traders, we can even see employees from various firms investing in stock markets today. But the point to be noted here is, how many of them new the fundamentals of stock markets? Are they really investing after proper research? How many of them actually know what a P/E ratio is? How many are investing based on rumours?
These are some of the things to be noted. I think, it is because of these reasons, mutual funds are admired a lot. They eliminate the risk of study and research about stocks. You leave all that to the professional fund manager, who manages the fund. Even in this case, you need to select the right fund with unique idea and good performance track record. So at any point, some kind of research is mandatory. After all, it is your money.
The most common mistake with the investors (small investors), especially who are new to investing in stock markets, is that they tend to invest when markets are high and try to sell when markets fall. This is because, they panic when are markets crash and tend to invest when they see markets marching ahead. So what is the solution for overcoming this?
The only solution for eliminating this risk is investing for long term. Your investment, whether it is in stocks or in mutual funds, will be fruitful when it is for the long term. Day trading is dangerous and is not at all advised. Every investor should be aware of the fact that, if he is investing in purchasing a stock of that company, it means he believes in that company's business and it should be like he himself is running that business. So you should have the right selection of stocks of the companies with sound fundamentals and correct business processes in place. Choose such companies, invest your money in their business (purchase stocks) and stay invested for long term. The same holds good even for the mutual funds. Preferably, it is better to invest in mutual funds through Systematic Investment Plans and most importantly, do not expect immediate returns and stay invested for long term. Only patience pays.
Note: Long term in the above article refer to a period of 5 to 7 years.
So it should be quite predictable that people will be interested in stock markets. Not only businessmen and traders, we can even see employees from various firms investing in stock markets today. But the point to be noted here is, how many of them new the fundamentals of stock markets? Are they really investing after proper research? How many of them actually know what a P/E ratio is? How many are investing based on rumours?
These are some of the things to be noted. I think, it is because of these reasons, mutual funds are admired a lot. They eliminate the risk of study and research about stocks. You leave all that to the professional fund manager, who manages the fund. Even in this case, you need to select the right fund with unique idea and good performance track record. So at any point, some kind of research is mandatory. After all, it is your money.
The most common mistake with the investors (small investors), especially who are new to investing in stock markets, is that they tend to invest when markets are high and try to sell when markets fall. This is because, they panic when are markets crash and tend to invest when they see markets marching ahead. So what is the solution for overcoming this?
The only solution for eliminating this risk is investing for long term. Your investment, whether it is in stocks or in mutual funds, will be fruitful when it is for the long term. Day trading is dangerous and is not at all advised. Every investor should be aware of the fact that, if he is investing in purchasing a stock of that company, it means he believes in that company's business and it should be like he himself is running that business. So you should have the right selection of stocks of the companies with sound fundamentals and correct business processes in place. Choose such companies, invest your money in their business (purchase stocks) and stay invested for long term. The same holds good even for the mutual funds. Preferably, it is better to invest in mutual funds through Systematic Investment Plans and most importantly, do not expect immediate returns and stay invested for long term. Only patience pays.
Note: Long term in the above article refer to a period of 5 to 7 years.
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