5 Questions You Ask Yourself While Purchasing A New Share

Whether you are a young guy in college, wishing to earn some money to reduce dependency on pocket money or a person who has just started his career and are not satisfied with salary and so forth, you can venture into share market and make smart investments.

We present you with five things to check before you go out into the stock market and start investing in stocks:

What returns do you want?

Ask yourself this question that how much money do you want to make out of the investment and for how long you want to invest. Also, you should know why are you investing?

If you want to invest for buying a car worth ten lakhs after five years, then your investment needs to be different from a person who wants to spend money for his post-retirement expenses.

How much risk can you take?

When we see an advertisement for a mutual fund on TV, something is blurted out rapidly which rarely people notice or understand, i.e., “Mutual Fund investments are subject to market risk. Please read the offer documents carefully before investing”. The same thing also applies to any investment instrument. You should know that with the opportunity to grow your money comes the risk of losing it as well. One should never invest all of their money in one single scheme / instrument because this makes it riskier.

Big or Small?

There are some famous and large enterprises which are listed on stock exchange and many small ones also. Both of them have pros and cons of their own. Big blue-chip companies can promise a stable but slow growth. Small caps can be surprising at times and can give out double-digit growth in a single trading session. However, along with these surprise elements also comes the risk, such companies’ share may have a debacle if even one significant shareholder pulls out of the company, thus wiping out a big share of your investment.

Did you do the homework?

Warren Buffet says "Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble".One should have done a good amount of research about the company, and also the sector company belongs. It is important to know what the company does exactly. If you have an understanding of annual reports and balance sheets, then it is advisable to go through it and have an idea about company’s recent performance, and its ranking in the sector.

Do you love it?

When you are investing in any company’s shares, don’t buy them because you like the company or its product, or be it that your father held the shares of same company so you too should have it. It is strictly advised to keep emotions out of stock market as the market works on Greed and Fears; you know two fluctuating things should not stay together.

Now we hope you are ready to take your first steps to share marketing so ahead and make the leap.