Friends, If we talk about investing in stocks, investment has always been considered complex cause of which many investors face losses. Friends, whenever you think of investing in a certain company, you choose it with very less information cause you have that information which everybody has and on the basis of that information. 

You make an investment in that company for a good return But there are some information which if we know of can increase our return this can turn a normal investing into a successful investing we can turn ourselves into a successful investor. 

Friends, If you incorporate those 5 pillars efficiently then you can increase your chances of making a return Friends, it is impossible to be perfect but by paying attention to a few simple things, you can be a good investor. Let's start our discussion on those 5 tips for invest in stock market which will turn you from a normal investor to a successful investor.


5 Tips For Invest in Stock Market for Beginners

1. Invest in a Business not its shares

First, the most important point is you must invest in a company, not its shares. What does this mean? Why is this small line so important for you? When I meet any normal investor and ask them which stock are they going to invest in? They tell me that they are going to invest in some ABC share. 

So friends, whenever you say that you are going to invest in ABC shares it means that you have not researched the company well When we talk about investing in a company. It is important to understand that you are not buying shares of a company but investing and buying a part of the ownership of this company. 

If you start thinking before investing in a share that you are going to become an owner of that company then your way of investing will completely change so friends, the difference between these two are very small Assume. 

If I talk about the company, ABC You think at one time its trade price was at Rs. 100 but today I am getting it at Rs. 50 Now I think, I should buy this share so will you consider it investing? No, I will consider it speculation cause you just saw the price and decided whether you want to buy it or not Now. 

In case of a good investor, he will see when the price of the share was at Rs. 100. How was it operating? How were its profit, revenue, operating profit margin, debt level, and its cash flow He will analyze these things and after analyzing he will see that now the company's price is trading at Rs. 50 so at today's date how is the business performing. 

Was there some change for the price to come down to 50? Was there an overall change in the industry? or is there any change in the financials of the company? Now if he feels, there is not much change in its business, profit, margin or on is long term prospects for expansion but its share price has come down from Rs. 100 to Rs. 50 so I should buy my ownership in this company.  

Other than this, he will think if I invested before and bought 1 share at Rs. 100 today I can invest and buy 2 shares at the same price.

Before investing in any share, think whats their business and that you are going to invest in it If I talk about business, you should understand the end to end from what does that company do, what product it manufactures, which raw material it uses in the coming 5 or 10 years, how is the company planning to expand itself. When you start paying attention to these things, you should start investing in shares. 

when you invest thinking of it like a business your chances of making a loss reduces a lot. Friends, I am not saying that you will have 100% profit after understanding these things but if you invest in shares like a business, then your chances of making a profit is more than 50%. 

Now let's talk about the second pillar but before that, I want to give you an example, Say if I stay in a locality wherein I feel opening a grocery shop will be very profitable in the coming days. 

And I tell you to open a shop here as the demand has increased a lot and there is a lack of supply So what will you think First, you will think of opening the business, then to set up it will take 6 months now you will start thinking of profit after one year. Once your shop has settled in, you will start getting profit. 

But this process will take a long time you will have to give it 1,2 or 3 years for setting up well. So friends, while setting up a normal shop you are thinking it will take 3,4 years to earn profits then when you invest in a big business in the share market, why don't you think of the long term. 

2. Invest for long term

I wanted to tell you here, If you ever invest in the share market, it should be for a long term. Cause as the first pillar states you should invest in the business, not in shares If you are investing in the business, it will take time to expand and evolve If for a minimum of 5 to 10 years, you invest in a good business, your chances of making a profit increases. 

The mistake which investors make is they buy shares in a certain company and after investing in its business the moment the price of the shares starts falling, they sell it off and just in a small time frame, they keep booking the profit or selling the shares and never invest for a long term. 

If we combine the first and the second pillar if you choose a good business and it will take 5 to 10 years for its expansion if you invest in a particular business now for the long term, it will increase your chances of making a profit. 

The second pillar is to invest in the share market to be precise to invest in a business for the long term to give time to the company to see if the growth which the management promised is been delivered or not so. 

Friends, you have to invest for the long term but as a good investor you should look at its quarterly results you should pay attention to every news so that you have knowledge about the company from time to time thus your perspective on investment should always be for long term. 

3. Always have a margin of safety

Now coming to the third pillar, it says, always have a margin of safety, Now as an investor you would like to know, what is a margin of safety? The first person who spoke about the margin of safety was Gram. Gram was Warren Buffet's teacher who had written a book in which he had explained about the margin of safety and its investment. 

So, friends, I would like to explain the margin of safety with an example Say if there is a lake and we have to make a bridge on that and you have been told the load which will go from there is of 10 million tonnes so for 10 million tonnes to travel, you will have to create a bridge. 

So when you estimate, would you estimate for that particular load or for more than that so when you plan for the bridge, you plan it with 10 to 20 million tonnes in mind 2 to 3 times more so that you can accomodate the estimated load well on that bridge. So this is called the margin of safety. 

You are keeping a margin for the estimated load so that if it increases in the future you won't have to face any losses over there and the bridge would be able to cater to that load. Now if we talk about the world of share market investing you should keep a margin of safety from the price you are buying the share. 

Explain the margin of safety

At So now in the share market, how can you explain the margin of safety? When we talk about any share's price, assume there is a company called ABC with its share price at Rs.100 as an investor, you should know that its price as of now is Rs. 100 but when you start fundamentally analyzing and understanding the business with its cash flow, profit then you compare it with its competitors, feel its price should be Rs. 80, not Rs. 100. Its called Intrinsic Value. 

So, friends, there are many different and complex ways to take out the Intrinsic Value of a company but if there is a normal an investor who doesn't understand complexities then he should understand that current price should be how much lesser for him to invest. 

in it Assume its share price is Rs. 100 but you want to invest at Rs.80 then you will invest when it comes to Rs. 80 so you get a margin of Rs. 20 which helps in reducing your loss as well as to increase your investment, so whenever we talk about investing in a stock market then you should definitely think about margin of safety you should think of what price is right according to you. 

Say if the price is Rs. 100 and you have thought you will buy it at Rs. 90 only then the Rs. 10 margin can be very helpful to you as an investor. 

4.Asset allocation strategy

Friends, The name of fourth pillar is asset allocation strategy how should you allocate your money in different assets. Do you want me to tell you a formula here that in debt you should invest 20%, in equity 60% and 20% in rest so, friends, nobody can tell you a formula here cause anyone's formula cant be right for you every investor has different risk and according to this risk, investor allocates money in different shares. 

So friends, in order to understand this, it is important you know about risks now, how would you know about your own risk? So risk tells you the chances of your amount invested to go down. 

Assume, I am an investor who doesn't want his money to go down then my asset allocation strategy would be very different in that case, what will he do? I will invest a lot in liquid fund cause volatality is very less and it doesn't go down much I will invest a bit more in a debt fund and invest lesser in equity. In equity my money would be more in large-cap I will put less money in small-cap and mid-cap.

When I talk about an investor who wants to take a lot of risks cause he wants a lot of return So it should be clear here that for higher returns you need to take higher risks. So in order to take more risks, your asset allocation strategy would be very different. 

You should allocate in assets where the risk and returns, both are more If I talk about equity, Its an asset classes where risk is more. And your chances of reward is more as well You should go for small-cap considering you want higher returns and are ready to take higher risks for it so after small-cap, you will put some money in mid-cap and then in large-cap. 

thus you should not try to replicate other investors portfolio cause their asset allocation strategy is according to their risk and so your asset allocation strategy would have to be completely different from theirs. 

5. Diversification

Now friends, coming to the fifth and last pillar which are very important in the world of investment. about which I talk about in 1 out of every 5 articles of mine Its called diversification. If I tell you about diversification again then you should not keep all your money invested in an asset instead, you should diversify it. Diversification can be done in class level or even can diversify in one asset itself and benefit from it.

Now I will try to explain it in detail In asset level diversification can be done as you have invested in a particular asset if that asset didn't perform well but your portfolio is diversified then your chances of incurring losses become lesser. 

Like I will try to give an example, say you invested 60% of your money in the stock market Now in the stock market, you invested in small-cap, mid-cap, and large-cap stocks. Now 20% you invested in mutual funds wherein you invested more in debt mutual funds, now you will get the benefit of diversification here. 

Like you invested in equity as well as in debt. but still, 20% of your money is left which you have to invest in different places. For that, if you want to do diversification in asset classes then you put money in real estate and gold cause Gold acts as a hedge many times.

Like you know when the news of coronavirus came out If you had invested in equity your whole money would have gone down for some time but if you had diversified and invested some money in gold then your investment would have seen a surge So the benefit of diversification. Is if one asset class goes down then the other asset class goes up now if you had diversified in your asset class. 


Diversify in one asset in different ways?

Now, how can you diversify in one asset in different ways? so friends if you were only going to invest in debt mutual funds then you can diversify here as well so friends, how can you diversify in debt mutual funds? you can allocate money among liquid funds, low duration, and long-duration funds. so that money will get diversified in debt mutual funds and stay other than this. 

if I talk about equity class then you know, how to do diversification here Allocate money in mid-cap, small-cap, and large-cap. Diversify according to your risk. 

Now you have thought on diversification, now I will again talk about the fourth pillar, Asset allocation strategy both are linked together when we talk about diversification and risk. 

You analyze according to your risk on how to diversify after which you will pay attention to your asset allocation stategy You distribute your money in different assets to get better returns, diversification benefits, and risk reduction. 

Friends, I hope you would have liked today's article We made this article purely on educational purposes cause there are many important things which seem to be less significant but while investing, if we focus a bit on them then your chances of making the return increases and it also reduces your chance of making losses.

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