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17 Oct 2021, Edition - 2287, Sunday

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Business

How to Intelligently Invest in Shares when the Stock Market is Soaring?

Covai Post Network

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Stock market is indeed one of the best things, and one of the most productive ways of investing your money. However, there are plenty of technicalities which are involved in stock market. Especially when the market is really high, that is the right time to invest and make the most out of it.

There are many people or rather investors who love to take risks and invest in the stock market when it is the most dangerous of times. The Indian stock market is currently quite volatile but experiencing a lot of high points too. Indian investors are afraid of moving in the current situation.

They are confused about whether to proceed and invest more or exit the current market to get some help with stop losses. Most investors are afraid of the immense volatility of the market, whereby they fear that staying or investing too much into the market can result in huge losses if the market trend falls and displays a negative or red graph. The dilemma persists as they cannot be completely confident about exiting the market if it shows positivity and a prospective green diagram.

Dividend-Paying Stocks are More Profitable:

There are two possible ways by which an investor can gain profit from stocks. One of the methods is through capital gains which is the net profit compared to the buying price after selling the stocks ultimately, which is helpful for short-term investments.

The other way is through dividends offered by the companies on a quarterly or annual basis. Dividends are provided to shareholders from a part of the total profit made by the company in a particular quarter or year. Depending upon the number of shares you hold for a company, the dividend would rise. Again, the concept of dividends is risky since companies that do not earn much tend to shy away from giving out dividends. On the other hand, companies that make substantial monetary profits and keep away from debts are more likely to pay the shareholders with dividends.

Companies that provide their shareholders with dividends regularly are least prone to be affected when the market is volatile to its maximum. It enhances the fact that the company is stable and is monetarily capable enough to survive extreme stock market conditions.

But before someone invests in any company, be it something that offers capital gains for short-term investments or dividends for long-term investments, studying the market is crucial. A great way to do that is through stock market courses.

Pay Less Attention to Speculations:

Speculations in the stock market refer to the rapid selling and buying technique in the hope of gaining some profits out of the market. On the other hand, investing refers to the thorough research about the market trends, analysis of future outcomes, and buying or selling the stocks.
Since volatility goes hand-in-hand with the stock market, it is better not to aim for speculations. Making speculations has the primary aim of hitting the bullseye with several chances quickly that can be risky in the long run. One can inflict immense loss on themselves while speculating as the chances of profit are not ruled out.
Instead, calculating every move ensures that even if one loses, it can be made up with the next steps. Doing proper research instead of rapidly dancing around the market can be very helpful in the long run and prevent catastrophic losses.

Give Attention to the Stop Losses:

Stop losses are an essential part of trading when someone aims to invest for short-term goals. As the term suggests, stop loss is the threshold where a customer needs to buy out or exit from investing in a particular share to avoid any monumental loss.

This threshold price needs to be studied carefully as well as regularly to act at the right time. The main aim behind learning a stop loss is to gain the maximum and lose the minimum. It substantially minimizes your losses, and there are numerous stock market courses available online that teach new or even experienced investors about every aspect of the stock market, including something like stop loss.
A good rule of thumb regarding the management of stop losses is to equally move the level of it as the particular share price goes up. This creates a balance between the changes in the price of that share, thus helping you to analyses better and in a proper flow.

Having a solid knowledge of stop loss helps you to manage your market better. Proper timing to enable your stop loss would allow you to lock the maximum gain that you can earn from a particular share.
There is another idea of stop-loss known as trailing stop loss, whereby the movement of the stock price and the direction of the stop loss is in sync for automatic updates on the changes and profits.

Hence one needs to take calculated risks and keep all aspects in mind to gain the maximum profit from the stock market. The stock market is all about taking risks, and to handle such risks successfully is a matter of one’s skills.

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