There is a saying that goes like “money can’t buy you everything” absolutely correct but trust me this is also a fact that money can buy you most of the things and almost everyone in this world definitely wants to become rich. But do you know only the richest 1% own half the world’s wealth? Have you ever wondered why it is so and how you can come under that 1%.
Well there are several ways like :
- Start a new business
- Educate yourself
- Take calculated risks
- Invest in stock market
- Exploit your skills
- Crate passive income
- Think big
And the list goes on and on …
If you list down the names of top 10 richest people in the world, you will find Warren Buffet always on the list. Everyone on the list can be identified with their company but Warren Buffet is the only person on the list who has become rich just by investing in the stock market, yes you heard it right.
Warren Buffet has a net worth of about $85 billion and he is still the 7th most richest person in the world just by investing in the stock market.
Such is the strength of the stock market if studied and done right it can create miracles for you.
What is a stock?
But since A is taking money from people it has to give something in return, so A decides to give a small portion of ownership in return and this share of ownership is known as a Stock.
To put in a simple language a stock is the all the shares into which the ownership of the company is divided.
What is the stock market ?
The stock market is actually a number of stock exchanges around the world where investors are involved in buying and selling of shares of publicly listed companies.
You may also need to be updated on the stock news to get updated on stocks and trading and boost your confidence on investing
How does the stock market work?
The process of the stock market is pretty simple, we have buyers and sellers of the shares of publicly listed companies who are involved in buying and selling of these shares and all this happens through a network of exchanges, which we know as stock exchanges.
So, basically, companies list their shares on stock exchange through IPO or Initial Public Offering and from there investors buys the shares which help the company to raise money for the business. And the buying and selling of these shares goes on and on till the company exists.
Now that we have a basic understanding of the stock market, let’s discuss the key points we should keep in mind while investing in the stock market which will eventually help you build wealth.
Understand the market well
The very first thing before you start investing is understanding the market very well and getting familiar with all the terms and conditions so that you have complete knowledge of the market, how it works and what are the things to be taken care of.
Understanding how the stocks are valued and how to find out the companies in which you should be investing, how to find the overvalued and undervalued stocks, what are the right stocks for you as per your risk level are some of the very few questions you will have in mind.
So you have to find out the answers to all these questions and then only you should proceed with investing in the stock market.
Make a Financial Plan
Make a financial plan as per your needs and requirements and risk level.
This will help you to become stable in the market which helps us in taking sound decisions. Wrong decisions in the stock market will always hold you back from reaching your goals. So your plan and the decisions has to be spot on whether the market is going up or crashing.
You should always have finances whenever you have an opportunity to invest.
Investing For Long Term
Long term investing is the key to success in the stock market.
People tend to get scared really quickly in the bearer phase of the market and hence sell the shares at losses out of fear and hence they incur losses and eventually lose the opportunity to make use of the bearer phase.
Study the company you want to invest in very well and if you believe that the company will grow then believe in yourself and stay invested till the time you think is right.
Make Regular Investments
Making the investment regular is the key to achieve your goals which is absolutely possible if you plan your expenses and income properly.
You should always distribute your income in the ratio of 50 : 30 : 20. 50% of your income should be used for all your day to day expenses of basic needs then 30% should be there for fulfilling your luxury needs and the remaining 20% should definitely be there every month for the savings which you will be investing in different forms.
This process will help you make your investment regular and you will eventually achieve your goals.
Start by Investing in Mutual Funds
In case you are absolutely new to the stock market and the fear of losing all your money scares you to start your investing journey then Mutual Funds are best suited for you.
Yes, even Mutual Funds are risky but you have different kinds of funds available like large cap, mid cap, multi cap and small cap and you can choose any one of them depending upon your risk taking capability.
Go for large cap funds which includes the best companies in the market and play safe or otherwise go for small cap if you can take risk and make more money.
The best would be going for multi cap funds that have a perfect balance of both.
Know When to Exit or Sell
This is one very important point and in fact the most important point in the stock market.
The only way to make money in the stock market is to know when to buy and when to sell. If you master the buying and selling in stock there is no way you cant be successful in the stock market.
Don’t Put all the Eggs in a Single Basket
Never pickup 1 or 2 stocks, that is always risky. The wiser thing to do is invest in as many stocks as possible and that will give you an opportunity to diversify your portfolio and at the same time you will have a much safer and better portfolio as well.
Dedicated Time Investing
If you really want to get successful in the stock market one has to devote time to investing as this activity requires continuous updates of the market and depending on that you have to take the right decisions at the right time.
Top Stocks to Invest in 2021
The year 2020 was heavily tied to economic recovery as the whole world fights against COVID-19, but now it’s time to look ahead for new investing opportunities.
Market value: $205.2 billion
Dividend yield: 2.6%
|NVDA, popular maker of microprocessors for applications such as PC gaming and artificial intelligence was a winner in the year 2020.
|JPMorgan Chase||Industry: Diversified banks
Market value: $369.0 billion
Dividend yield: 3.0%
|JPM is all set for an economic rebound and can join Bank of America as one of the best stocks to buy in the year 2021.|
|Amazon||Market Value-$1.6 trillion||Amazon founder Jeff Bezos created a new record when his net worth jumped by $13 billion in a single day. Amazon shares can become the most invested stock in 2021.|
|Berkshire Hathaway||$544 billion||Berkshire Hathway’s shares are too expensive as it has decided to split its stocks which results in a high rise in price of each share along with the immense growth of the holding company.|
|Walt Disney||$328 billion||Walt Disney with its likely return of dividend is inviting investors in buying its stocks.|
|Alibaba Group||Industry: Internet retail
Market value: $713.7 billion
Dividend yield: N/A
|Alibaba’s revenues have been tripled in 3 years. The stocks of Alibaba group are booming which makes it one of the best stocks to buy in 2021.|
|Microsoft||Industry: Infrastructure software
Market value: $1.6 trillion
Dividend yield: 1.1%
|Microsoft’s earnings are expected to increase at an average of 15% for the next 5 years.|
Investors are quite confident that all the leading brands like Google, Amazon and Apple will continue to touch greater heights in 2021. Some of the important things that one should always keep in mind while investing in stocks are-
- One should always invest under the advisory of an expert
- Have a balanced portfolio before investing
- Do not invest without proper research
- Do not over diversify by purchasing too many stocks
- Always invest using a trustworthy platform
Investing in stocks does come with a risk factor but it can be extremely rewarding if you have the patience, skills, focus, mindset and clear financial goals.