In this article on the basics of investing in shares, we have discussed 5 principles of investing using which one can invest in stocks with less money.
Invest in Stocks with Less Money
Hi, there is a big myth that only those can save and invest who have disposable income. and who have low salaries or have a limited budget cannot save or invest. You might have heard a lot of people say this, but it is totally wrong.
Today we will tell you about 5 principles following which you can invest even on a limited budget. and can create wealth in the long run. For any successful investor, the habit of saving is very important. If you are not able to save then how can you invest. So you would have to prioritize savings monthly.
Ideally, you need to save 20% of your income regularly. and as soon as your salary comes, keep this amount aside. It is not important that you invest a major portion of your saving every month. You can keep an emergency fund and savings for urgent needs that come up.
But this is important that you be disciplined in investing some amount every month. Rather than keeping your savings as cash at the bank, you can invest them in liquid funds. Liquid funds are a type of debt fund, which invests in short-term debt. You can take your money out of liquid funds anytime and can redeem all units within 24 hrs.
Generally, liquid funds give a better return than a savings bank account. Reason being that they carry the risk of mutual funds. Normally people invest lumpsum in stocks, but the way to invest in stocks is to shortlist your favourite stocks after research. and when their price falls, invest in small amounts gradually With this strategy, you can lower your risk. And since stock markets are volatile, you can buy at cheap rates. The Indian stock market has around 4000 stocks. Normally people go on the suggestions of an advisor or a family member and invest without doing research of their own. It is better to invest in those companies and sectors which you understand. and are confident that it would show good growth in the next 5 to 10 years.
How to find the Intrinsic Value of a Stock
As an investor, it is not possible for you to analyze every company and sector. So you should focus and research on those specific companies to invest. And after the research, you find good stocks then you should invest in them and stay invested in them for the long term Normally people sell their stocks after getting a return of 10-15% and due to this, you don't give a chance for your investments to generate wealth.
Earlier also we showed you through a video that if you had invested 10000 in Infosys in 1995 So by the end of 2020, you would have had 6880000. Now imagine if any investor sold the stock after making a return of 10-15%, they missed a great opportunity.
But this also doesn't mean that you forget after investing in a company's stock. Till the time you don't find a red flag that could impact the company's long term performance you can stay invested till that moment. But when you feel that their have been some fundamental changes in either the company or the sector, then you can exit from that company or sector.
So an investor can generate wealth even if on a small budget by investing in the stock market but it is not that easy, you need a lot of research, patience, and discipline.
We make all article for educational purposes so that we can deliver the right information. You can further do your own research, invest for the long term and make good returns.
Thank you!
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