Ready to dip your toes into investing? Here are three basic mantras

Highlights 

  • Investing is not as easy as it seems and investors, especially beginners, need to have some basic financial and business acumen before they dive headfirst into the world of investing.
  • With lucrative returns seen in the last one year, investing might seem as a piece of cake.
  • Investors should be prepared for any unforeseen events, despite how good of an analyst they are.

The one-sided rally in stock markets across the globe, which started after the financial meltdown of March 2020, has sparked an interest among new investors to invest in the financial markets. Many first timers have come into the market or are planning to, looking at the lucrative returns investors have fetched in the last one and half years.

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However, investing is not as easy as it seems and investors, especially rookies, need to have some basic financial and business acumen to begin with. If you are new to the game of investing and looking for a few tips on how to begin, you are at the right place. Given below is the list of three tips that might give you a head-start in your investing journey.

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  1. Don’t wait for the “right time”

Most people delay investing, waiting for the “right time” to invest. According to most investors this so-called right time could be cheap valuations or waiting to have enough surplus cash to invest. But a very few understand that while waiting for that one moment, you could be missing out on a whole lot of opportunities.

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Start investing even with a minimal cash surplus and continue to do so consistently. Also, try to capitalise on corrections rather than waiting for one major fall, which could even take years to come.

  1. Learn to analyse businesses

The whole essence of successful investing is picking up the best businesses from a list of thousands. Fundamental analysis is the key here. It helps one to understand how a company is doing financially and what growth could be expected out of it in the future.

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Fundamental analysis also helps to compare businesses within the same sector to pick the best one. A higher level of analysis such as macro analysis could add an additional layer of check while separating the wheat from the chaff.

  1. Be well-versed with risk management

Risk management is one of the most important factors in successful investing. No matter how good an analysis is or how good the company is doing, still the future is uncertain, and you should be prepared for any unforeseen events.

This is where risk management comes into picture. By properly managing your risk beforehand, you may not completely be able to dodge these adverse events but would definitely be able to reduce the impact. Some popular risk management techniques are diversification, having a controlled position size, etc.

Bottom line

Lucrative returns seen in the last one year might make investing look a piece of cake. But these periods of bull run come once in a while and are often succeeded by a consolidation phase or even worse, a bear market. These are the periods when it is not as easy to invest as it is during a bull market.

So, here comes a bonus tip – try to prepare as if you are going to invest during these relative tough phases of the market rather than a smooth bull run. Also, one can refer to masterpieces written by investing legends such as Peter Lynch, Ray Dalio, etc. to get an insight into the brains of these billionaire investors. 

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