After making the Demat account the most obvious question as a beginner is where to invest. In a bull run, everyone makes the money but the stock market tests the patience of investors during a bull run. According to me, there are some prerequisites that can be helpful for you while entering the market.
1. Know Your Self
As Vijay Kedia words he says,” as KYC is important to know your customer, KYS helps you know your self”. If you are following any social media influencers for buying recommendations then you are blindly following them.
In this scenario, you are making the biggest mistake of not knowing yourself. Their risk-taking capacity may be different from yours. So, your decision will always be your decision. Which, will help you to hold the stock for the long term.
2. Sunrise Vs Sunset Industry
Sunrise industry means the industry which is born recently and can generate very high revenue in the future. While on the other hand sunset industry is established a long period ago but currently are not successful.
Always make sure you’re investing in the industry which is blossoming or in the future it will boom like anything. At one time textile did well but today textile industry is struggling and is in a kind of downward trend.
When you invest in the Sunrise industry then you not only become future-ready but also your money gets time to compound itself over the period of time. Currently, sectors like Technology, Renewables, EV, Healthcare are sunrise industries. They have a very high potential for growth in the future.
3. Diversifying the Portfolio
They rightly say “Never put all your eggs in one basket”. There are periods of cycles in the stock market. In simple language every year there will be some sectors that will give very good returns and some sectors will struggle to outperform the market.
If your portfolio is well diversified then it will help your portfolio to bear any crash like the Covid-19 crash. There should be 10 to 15 stocks in your portfolio. If you buy more than that then it will become chaos for you to check large baskets of stocks.
4. Buy on Dips
If you are buying certain stock then you must have the courage to buy it even if it falls 40 to 50%. Buy low, sell high is a simple phenomenon you need to keep in mind. When the market falls then everybody on Dalal Street is negative about the market. At that time one should be positive about the Indian economy and its future outlook.
Never miss the chance of panic situations because only at that time you will get stocks at a very cheap price.
5. Investing by Sector wise
Financial services comprise the largest part of Nifty 50 with a 35.60% contribution. While 2nd biggest contributor is IT sector, Oil & Gas sector consists of 12.31%, Consumer Goods for 10.77%. Above all sectors is the biggest contributor to the Nifty-50. If Nifty gives stellar returns in the future then all of the above sectors have to perform well.
A lot of money has been made in the stock market through thinking differently from herd mentality. Always remember buffet’s advice, “Be greedy when others are fearful and be fearful when others are greedy”. Investing sector-wise helps to know where to invest in the stock market.