So Investing in share market is really a great idea since you can gain so much profit. Now the question arises how do we get profit out of stock market?
Investing involves risk. Over the long-term, assuming a fairly efficient market, investors will be compensated for taking risk.
These are the major difference between real investors and gamblers. Gamblers invest money without knowing the entire functioning and without research. They also have a myth that stock market can double the money within weeks or even in days.
There are some basic guidelines you need to follow before coming into the market. First you need to understand how the things work in stock market. Actually it is a game and you must need to know the rules and must follow the same. If you want to play with out knowing the rules then your chances of winning will be very less or I can say its ZERO. But if you know the rules and play by the rules then winning percentage will be high and here experience is also matters like in the game of cricket. You can't win all the games but if are a good learner then you must understand the power of education and experience. Some of the tips are as below to reduce the risk, We can't remove the risk but we can reduce it by using the following guidelines.
1. Analyze you house hold expenses and try to reduce them as much as you can.
2. Keep emergency funds for at least 6 months. Let say you have fixed expenses of 30,000 per month then you must have 1,80,000 rupees in your savings account for any emergency that must not be touch in any situation.
3. Don't buy anything that you don't need.
4. Start reading the charts and history of the big companies, scams happened in the last two decades, business models, annual reports, quarter results, business future, company management etc to ensure that company will grow and business model is sustainable.
5. Read books on investing.
6. While learning don't be greedy and don't jump into the market based on some sentimental effects. Learn and analyze the market at least for 6 months.
7. Don't try to earn money over the night.
8. Don't put all the money in a single company diversify it between the companies and different industries.
9. Don't bet on the companies if you are not able to understand their business model, growth and future.
10. Keep reading and investing in good companies at the right time.