Tips For Attaining Better Returns In Equity Space

The stock market returns always attract the investors into the lap of stock markets but still making wealth in equities is not an easy task. Every investor is looking for a short cut for making a return through the equity market, but one needs to understand that there is no thumb rule to ensure safe and stable financial gains in the stock market.

Although there is no sure-shot formula or golden rules, but still, there are some tips may be judiciously adopted for securing enhanced returns from the equity market. So here are some tips, if followed prudently, may increase the chances of getting a better return or payoff:

• Avoid the herd mentality: Majorly investors get easily influenced by the investment strategies and stock selection ideas of other market participants. Suppose if everybody is investing in a particular stock or sector then the share price of that stock will move upward, and this may tempt the market players. But they must keep in mind that this strategy may not work in the long run game as this is already cashed by the market and the share price may return/settle back to its reduced value.

So, if the investors do not want to lose their money, they must avoid the herd mentality. As once quoted by Warren Buffett that “investor must be fearful when others are greedy and be greedy when others are cautious”.

• Risk tolerance: It’s a psychological trait. The risk tolerance indicates risk taking capacity/behavior of investors and the degree of anxiety they feel when risk arises. The risk perception plays a vital role while devising investment strategy. As investors gain more experience in managing the ups and downs of the stock market investments, their risk tolerance tends to increase with the enhanced ability to make the entry-exit decisions of the market.

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• Prudent Research: Before entering into a stock market, market participants are advised to conduct prudent fundamental, economic and technical analysis of the country’s macro-economic fundamentals, prevailing government regulations, stock market recent performance, company’s fundamentals, and industrial and sector performance. People generally make their investments by going by the name of a company or the industry they belong to. This is not an ideal way of investing in the stock market.

• Business Analysis: Before investment, the investor must understand the business model of the company, annual returns, financial ratio analysis, recent business, financial and stock returns and where it stands in competition with its peer companies.

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• Handle basic first: Before entering into a market, investors must learn about the basics about the equity market. There are some areas with which investors should be familiar before investing. Some of the areas are Financial metrics and its definitions, technical analysis and so on.Investors must understand the meaning of financial metrics and must know the utilization of them. Some of the financial metrics are the P/E ratio, PEG ratio, ROCE, ROE, and CAGR (Compounded annual growth rate). The investor must focus on the calculation of these metrics. By this investor can get the idea whether that stock is undervalued or overvalued.

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Technical analysis is very helpful if investors want to know the trend of the market. By technical analysis, an investor can make a judgement when to enter into the market. The technical analysis is helpful in the short term.

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