A lot of new people who starting trading in equities make the mistake of putting too much of their wealth at the beginning. Before you even think about getting into equity trading, it is vital that you prepare an extra buffer fund to prepare yourself for any unpredicted events.
Even though several specialists may argue over the sum of money required for trading, the agreement is that you must be able to maintain your lifestyle for 3-6 months from your alternative fund.
Since an emergency fund is intended to guard you in case of a disaster, that money has to be readily available in a highly-liquid savings bank account or money market account. Under no conditions should you consider using these funds to trade. These funds must only be located in accounts that are exposed to very little threat.
You don’t need much money to be successful at stock trading. However, a little wealth makes it tremendously tough to get a steady start in the stock market.
For a decent start, lookout for accounts at a minimum brokerage. This amount is typically fixed because it is in the broker’s top interest to retain trading for as long as possible so that they bring more and more commissions. These minimums are frequently put into place to decrease the risk of you utilizing your funds in a small number of trades.
Risk, too, is unquestionably relevant to trading; where there is no risk, you can’t think of making a good return.
It is also significant to think about diversification. The dividend-paying stocks of top-50 companies are rather safe, and financiers can predict to make mid-to-high, single-digit returns throughout several years. Diversification is a significant portion of the risk. Holding a portfolio of funds that all have similar risk can be dangerous.
Bottom line
If you are new to the share market and especially if you are still in the learning stage, it is suggested to begin with small risks. Invest as little as possible and emphasize more on the learning. Anything between Rs1,000-5,000 will be a good amount to start. It’s also vital to acquire knowledge on how to value invest for attaining true, life-long wealth.
