Sharekhan Blog

5 Tips to Invest in the Equity Market

  • Jul 24, 2023

As a company's performance improves over time, more investors start to show interest. As a result, these investors will pay more for the shares. That suggests that the price of the shares of stock you now own has increased due to rising demand. If you sell your shares for more than you bought for them, you will make a profit. Since stocks and other market investments might, of course, lose value, there is no such thing as a risk-free investment.

5 tips for generating income from stocks

You probably won't see considerable development if you don't adhere to certain basic market best practices and concepts. Here's how to ensure that your portfolio gives you the best possible service.

1. Utilize your time efficiently.

Even while it is possible to make short-term gains on the stock market, investing for the long term and taking advantage of compound interest have the most earning potential. As the value of your assets increases, your account's overall balance increases, offering the possibility of even greater capital gains. In this method, stock market profits increase significantly over time.

But to profit the most from that exponential gain, you must begin investing as soon as you can. Let's use the scenario where you started saving INR 1,000 for retirement at the age of 20 to leave your work at the age of 70. Even if you didn't contribute any further funds to the account and used a conservative 6% rate of return, after 50 years of growth, you would still have more than INR 18,000 to look forward to.

If you had made that initial contribution at age 60, you would have earned less than INR 800 through compounding.

2. Make regular investments

The expansion of your overall portfolio depends heavily on time. However, even decades of compounding earnings can only go so far if you don't continue saving. Returning to the earlier retirement scenario, let's say this time you made a deposit of INR 1,000 and instantly forgot about it in favour of making INR 1,000 in contributions annually.

If you had started making those yearly contributions when you were 20 years old, you would have saved over INR 325,000 by the time you turned 70. You would end up with almost INR 15,000 even if you wait to start saving until you were 60 years old, which is far more than the pitiful INR 1,800 you would withdraw if you only made the initial commitment.

Regularly giving doesn't have to be challenging; you may automate the process by sending a certain amount through your brokerage account each pay period or week. We even provide a list of the finest brokerage accounts to help you get started.

3. Set it and forget it generally

Keep in mind that if you want to see significant returns on your stock market investments, you are playing the long game. One reason is that day trading and other short-term trading strategies lack the tax benefits associated with holding onto your investments for a longer length of time. On short-term capital gains or stocks, you've owned for less than a year, you'll pay a higher tax rate than you would on long-term capital gains. Even though there are some situations where you may need to reassess your investments, the most market falls, including severe ones like bear markets, eventually turn around.

4. Keep the variation going

Every investment has some risk; some of the companies you invest in may perform badly or even fail. However, if your assets don't perform as expected, you might be able to save yourself from losing everything by diversifying your holdings. If you diversify your assets over a variety of securities, you'll be more robust to stock market declines. You may diversify your risks by buying a little bit of everything as it's unlikely that all firms and sectors would have the same difficulty or success.

5. Take into account using a specialist.

We use professionals for everything from our healthcare needs to our plumbing necessities. Your money should be handled with the same degree of professional knowledge. Since they may assist you in creating a long-term investing strategy, financial advisers may turn out to be the most important investment you ever make. In addition to teaching you, how to earn money in the stock market, professionals may help you with a wide range of personal financial difficulties, such as budgeting, planning for a college education, or even estate planning. A financial consultant may also be more affordable than you expect.

Make sure to diversify your holdings, invest regularly, and give your assets time to compound interest and increase in value if you want to succeed in the stock market.

These articles have been prepared by Sharekhan and is not for any type of circulation. Any reproduction, review, retransmission, or any other use is prohibited. Sharekhan shall not be responsible for any unauthorized circulation, reproduction or distribution of this material or contents thereof to any unintended recipient. Kindly note that this page of blog articles does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The value of the investments may be affected generally by factors affecting financial markets, such as price and volume, volatility in interest rates, currency exchange rates, changes in regulatory and administrative policies of the Government or any other appropriate authority (including tax laws), or other political and economic developments. Please note that past performance of financial products and instruments does not necessarily indicate the prospects and performance thereof. The investors are not being offered any guaranteed or assured returns. The securities quoted are exemplary and are not recommendatory. While we would endeavour to update the information herein on a reasonable and timely basis, Sharekhan, its subsidiaries and associated companies, their directors and employees are under no obligation to update or keep the information current. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of use of the trading platforms mentioned herein. The trading avenues discussed, or views expressed herein may or may not be suitable for all investors. This information is only for consumption by the client, and such material should not be redistributed.

Team Sharekhan
by Team Sharekhan

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