Strategise Your Investments in Stock Market
Stock markets have always been elusive to the common mans’ dream of earning quick bucks. They are like a child’s play ground requiring courage, zeal to excel and being a step forward than your competitor. However discipline is paramount and synonymous to success. A disciplined investor knows how to limit losses and maximise profits.
The ingredients of success in a stock market are very basic namely surplus money, risk appetite, intuitive skills, rational approach and a flexible strategy.
Anyone can earn money if he can predict the trend and take a position accordingly. However, the art of trading or investing may not come naturally to one. We need to practice in order to develop the art. We need to be chivalrous, understand the market makers psychology and out-smart him.
Asset Allocation: implies balancing your exposure in various asset classes of Equity and Derivatives. One may invest 80% of their portfolio’s worth in Equity and the remaining 20% in Options (Derivatives). As the risk appetite increases and the understanding of market dynamics unfolds, the % of asset allocation may be tilted but not beyond 60% equity and 40 % Derivatives.
To elaborate more on the Strategic part of investments I shall quote an example.
Nifty50 is composed of stocks of top 50 most reliable and consistent Blue chip companies of India. Nifty50 is a diversified index and thus has companies from different sectors like FMCG, Oil & Gas, Metal, Realty, Bank etc. The fluctuations in the index may be because of Market news, Sector specific news, Stock Specific news. One sector may go up leading the Nifty50 index higher whereas some other sector may pull the index down. Herein you may have the following kinds of trading strategies.
The profits earned should be reinvested suitably to maintain the asset allocation ratio. Always remember that ‘Discipline’ is synonymous to success in the Stock Market. For any queries please email to Abhinav5884@yahoo.co.in
The above article is a brief for people who understand the terminologies of stock market.
