Investment strategy in stocks invariably depends upon the performance of the stock market.
Investing trends change with changing market conditions.
So what should be your investment strategy?
Can you forecast the stock market?
Well, nobody can rightly predict the behavior of the stock market. And one thing is for sure, that is the stock market can surprise you any time. The reasons may not be clear to you but the stock market can throw up such situations which you have never thought of ever.
So what should be your approach of investing in the stock market that leads you to make profit out of your investment?
A large part of this answer lies in the realization that stock market conditions are extremely volatile and can surprise you any time. So if one understands in what ways stock market can surprise you would eventually give us a better understanding of the stock market conditions and ultimately increase our overall chances of making profits from our investments.
Well we will be going to show you How Stock Market Can Surprise You? Here we would come up with scenarios which you should avoid while investing in stock markets.
To start with you may be a first time investor or a seasoned and experienced investor. The common investing approach adopted by both of these categories of investors is that they either ends up investing nothing or investing all their money at one go. Both of these investing approaches are wrong.
Let me show you how.
First of all, let us take the case when you do not invest at all. This happens when you wait for the stock market to fall to its lowest. But this never actually happens. If you are an experienced investor, you would probably be aware of this. The stock market conditions may fluctuate by 10% to 20% within a month. It may rise and also may fall. The stock market can actually surprise you.
So you never arrive at the ideal lower level where you can say “yes, now I can invest” and you end up not investing at all. In the process you also loose out the time and may also end up using your money for some other purposes. The final result being no investment and so no profit.
Secondly, let us take the case when you invest all your money at one go in lump-sum. Here based on the present market condition and your assumption that the stock market would rise considerably in the near future, you end up investing all your money in a lump-sum. But actually the stock market surprises you by dipping on the lower side and depreciates rather than rising. This way you end up loosing money rather than making profits out of your investment.
Thus we see that in both of the above scenarios, the stock market has surprised the investor. By this no one can actually cannot predict the stock market. It may turn out results which are contradictory to your expectations.
So what should be your investment strategy for investing in the stock market?
From the above discussion we are in a position to derive our investment strategy for investing in the stock market.
First of all, we have found out that there is no ideal time for investment in the stock market. So you should not wait for the right time for investment as there is none. You should start investing and invest for a long term to reap rewards of profits from the stock market.
Secondly, you should avoid the lump-sum investment approach and rather go for a systematic investment approach where you invest only a small portion of your fund at one time in the stocks. By doing this you can avoid making huge losses and in a way regulate your earnings from investments in stocks.
For detailed information regarding systematic investment you can refer our article on “Systematic Investment in the Stock Market”.
Thus we see that “How Stock Market Can Surprise You?”
But you can avoid landing in such a situation where stock market surprises you and you end up losing your money. Rather as we have already seen above, you can surely end up making profits if you correct your investment approach.