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Key aspects while investing in equities

Below are some basic but key aspects an investor should take care of while investing in equities to get proper security on the capital and better profits:

1. Always invest on a company whose business in understandable. This is an advice and practice from legend investor Warren Buffett. When the IT boom started and start giving super profits to investors in the beginning, Warren Buffet doesn’t even hold any shares of IT companies. He said, he didn’t understand their business. As a result, IT stocks crashed and put huge lose on investors. This is history and evidence. So go ahead with a company whose business is well known and understandable.

2. Always invest for long term. In the long term, stock prices trace earnings growth and also, the companies ability to generate free cash flow. While thre can be volatility in the interim period, both stock price as well as the financial performance of the company, if one has the confidence that a company can go the distance, invest.3. In present situation, mid cap and small cap companies are exciting. Remember, when buying mid cap and small cap, you are buying the volatility in their price too. Surviving the same required enough patience, the required best quality of an investor. A better and advisable method is to have a mix of both mid and small cap scrip’s in your equity portfolio to balance.

4. If you are new in direct equity investment or does not have time to manage your stocks and research, it is better idea to leave it to experts. Investing to equities through good mutual fund schemes would give you enough protection from shaving off your money and chance to grow investments through best and knowledgeable fund managers. If you have enough money to invest and doesn’t have time, invest through a portfolio management service firm.

5. Most important thing you should keep in mind that you are making your own destiny. Careless investment in equities will always give huge loses. Fluctuation is a market nature and surviving them by patience is a quality of an investor. Do not blame market for your lose. You should identify your risk profile before investing to equity market which is known as the risky asset class.

See the article, 12 Timeless rule of investing for better awareness and profit

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