A share market is a place where traders and investors buy and sell listed company stocks, commodities, derivatives, IPOs, etc to generate income.
It enables companies to sell shares and raise capital. Transfer of the capital is done safely and securely.
A share market encourages and promotes investment. Raising capital allows companies to grow their business, expand operations and create jobs for people, thus boosting the country’s economy. Share market investments are an important means of economic growth, trade, and prosperity.
For investors, the stock market offers a way to invest to be able to take advantage of the company. Traders can buy and sell the company’s shares safely and easily because of the high liquidity in share markets to earn a share in the company’s profit.
Step-by-Step Tips to Make Money from the Share Market
Step 1: Learn the basics of the share market and investing in stock markets
Is it possible for you to clear any competitive exam without prior knowledge of the subjects associated with it? The answer is no.
In the same way, jumping directly and investing in the share market without any prior knowledge will lead you nowhere. First, try to understand the share market by acquiring knowledge about trading, financing, investment, and other related terms.
You can read articles, newsletters, quotes, and books to gather information about trading and the share market. You can even consult a financial advisor or watch podcasts, journals, and courses related to the share market to enhance your skills.
Step 2: Understand your intention to investment objectives
Secondly, you need to understand your financial goals.
- What goals do you want to achieve by investing your money in the share market?
- What are the things and resources you need to put in to reach your goal?
- What type of investment tenure fits you between the long and short term?
Try to ask these types of questions with yourself and find the answers.
The reason to determine your financial goals and investment objectives is that you will be able to come up with an investment plan that will help you get the results you want.
Step 3: Choose an investment plan that suits your goals
Recall the question asked above about clearing an entrance exam.
If you want to clear any exam, you have to make a solid and proper study plan and need to follow it regularly to get the best result.
Similarly, if your financial goal is to become rich by the coming two or three years then, you have to plan your investment criteria. You need to select the best investment method which would fulfill your goals. You can choose from the below-listed investment plans:
- Value Investing
- Dividend growth
- Passive Investing
- High growth investment
- Trade options
Step 4: Make your investment portfolio
A share market investment portfolio is a collection of stocks in which you invest to earn profit. By investing in a variety of portfolios that cover a wide range of sectors (like stocks of food companies, stocks of IT companies, etc) you can become financially stable. This process is called diversification of portfolio. That’s because if one stock takes fire, investment in another stock will save you.
You need an investment portfolio to get the most out of different market conditions to protect you from adverse market conditions.
Take an example as when inflation is higher than expected, your real estate and gold investment will do better than other investments. When economic growth is worse than expected, your bond will work better than other investments.
Hence, you should avoid investing all your money in a single stock.
Step 5: Build your risk management plan
No doubt, investing in the share market is very risky. But, to earn a profit, you need to take the risk. It is also not wise to buy a single stock without gathering its past data, valuation, performance, and risk associated with it.
You have to minimize your risk when investing in the share market.
Good risk management means you have to put the risk-taking in each stock level, regional level, and portfolio level. Try to set the maximum risk while investing in stock to 5% of your entire account. If your loss exceeds 5% then, cut your loss.
Many people end up losing a lot of money because they don’t consider the risk management plan.
Step 6: Review your portfolio
In some cases, some stocks in your portfolio may go up significantly while other stocks do not move up and may go down. In situations like this, you have to review your investment portfolio regularly.