Admin Admin Aug 31, 2018 11:15 AM Other Shares How to earn money from stock market Every investor wants to make money in stocks, irrespective of the level of experience. It is easy to fall for the temptation, but one needs to have a good strategy in place to be able to protect one’s money and make handsome returns. Investing in the stock market is simple, but not easy. It requires passion, patience, and discipline. Plus, one needs to have a sound understanding of the market and the force at work and also some bit of research capability. Although there is no sure short formula or one size fits all solution for success in the stock market, there are some boards guidelines, which if followed prudently can increase your chance of making the decent profit. - Investing in Business An individual should always invest in a business instead of simply looking at the stock price. Abhimanyu Sofat, head of research at IIFL Securities says "Understanding a business will help one analyze the future prospects of a company and help make better investment decisions." - Avoid herd mentality The decision to buy or sell a stock should not depend on what your friends or relatives say. An individual should not invest in a particular stock simply because people around him are investing in it. This may not yield good returns and one may end up with heavy losses in the long run. Consider the case of the Reliance Power IPO, which had received an overwhelming response from retail investors. The retail portion was oversubscribed 14.4 times. The company got 19.5 lakh applications from retail investors. The IPO was issued at Rs 450 and retail investors got a discount of Rs 20 per share. The stock today trades at Rs 30(Post Bouns). The shows the kind of wealth erosion retail investors must have suffered. - Invest with a disciplined approach It is always prudent to invest systematically and with patients in the right shares or funds. As the stock market is always volatile, an investor should be ready to absorb calculated risk and decide a necessary course of action like hedging against underlying stocks. - Invest only Surplus Funds An investor should only invest surplus funds or money she/he doesn’t need in the short to medium term, in stocks. Since the equity market is volatile, there is always a risk of temporary loss/drawdown. In the words of Sir John Templeton, the global market guru, the four most dangerous words in investing are: “This time it’s different.” The stock market moves in cycles, and it requires domain expertise and right temperament to understand how a trend changes.