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Stock Market Investor or Trader – Why is It Important to Know Your Investment Style?

Investing in the Indian stock market or for that matter any other stock market in the world has always been considered as a high-risk affair. An innate desire to follow the crowd, lack of insights or credible information or a fairly slapdash approach to investing in stocks are some of the key reasons why time and again gullible investors have lost their shirt in stock trading.

It goes without saving, however, that a systematic approach to stock market investment together with a fair bit of discipline can ensure that you stay in the green most of the time and get optimum returns on your investment no matter which direction the markets are heading.

If you are new to the world of stock market investment, it would always be a good idea to understand your investment style and risk appetite. Here’s why.

Before you venture into the stock market arena, you need to determine or identify your investment style. Are you here to trade (short term gains) or invest (long term)? Trading falls in the high risk category where investors indulge in short term trading with fairly thin margins – a good example is day trading.

Since the time frame is short, the element of risk shoots through the roof with rumors, speculation, and emotions riding high. Trading requires a lot of expertise in doing your research well and understanding market trends, the need to be always on your toes, and being up to date with a lot of others factors that impact stock prices. Failure to spot even the tiniest of signals can have devastating effects.

For newbies, this doesn’t mean that you shouldn’t indulge in day trading or short term trading. You will of course have experts in the field who track the share market live and can provide you valuable information in terms of how and when to execute a trade. However, it is always advisable to tread cautiously and start small as when it comes to timing the markets, even the most seasoned players have bitten the dust.

Contrary to short-term trading or day trading, those who invest in the market with a long term view are probably the ones who stay the safest and get the best possible returns on investments. All that the investor needs to ensure is to do plenty of research and pick the best possible stocks to build his investment portfolio. Again, when it comes to long term investing, a lot of other factors come into play such as diversifying your portfolio across several sectors, reviewing non-performing stocks, and constantly looking out for investment opportunities that would help grow your investment corpus in the long run.


Kotak Securities is one of India’s share broking firm offering demat account, online trading, mutual fund and IPO investing service’s along with a research division specializing in Sectoral Research and Company Specific Equity Research. We also provide you with latest share market update and insights. Express your views on their Facebook Page and Twitter Handle (@KotakSecurities) or you can also visit KotakSecurities.com for more information.