Investing in the share market has become a popular trend in India right now. Making a huge profit in equities is not at all an easy task. The stock market is indeed volatile, and that’s why there is no success formula or short cut route. Rather, this specific domain calls for serious introspection. The word ‘safe’ is very relative, especially in case of the stock market, but one can look on how to benefit from Indian stock markets. What are various ways to benefit safely from Indian Equity Markets? Which options are suitable for low risk investors?
8 Ways to Benefit from the Indian Equity Markets Safely
Here are some of the ways to benefit from Indian Equity Markets Safetly. All tips may not be suitable for everyone. One should consider these tips based on their risk appetite and tenure of investments.
1) Investing Only Surplus Funds
The primary aspect is to look whether an individual has a surplus fund or not. There is no point in investing funds which a person cannot afford to lose. This is not a negative approach, but wishful thinking. Taking a risk in a volatile market calls for enough back up. Otherwise, the whole idea of investment can end up making huge losses. Thus, the initial decision making is very important and needs a matured understanding.
2) Invest Consistently
Often it is seen that many individuals don’t invest regularly. Rather, they tend to invest in fixed time. Such a protective approach doesn’t at all help any person. So, it is important to invest regularly. Anyhow, the amount or investment may vary from one person to the other. Investing in some of the good SIP mutual funds consistently would be always better.
3) Using Professionally Managed Investments
For small investors or new investors looking to start investing in equity, the direct stock purchase may not be feasible. It is easier for small and risks, adverse investors to use managed investments like mutual funds and unit linked insurance plans (ULIPs) to venture into the equity market. While mutual funds are standalone investment avenues, ULIPs offer multiple other benefits as well.
What are ULIPs? ULIPs are investment cum life insurance plans offered by life insurance providers in India. Through, ULIPs you can invest in a multitude of investment avenues, for example, equity market or fixed income instruments. One major difference between investing through ULIP and other similar investment plans is that ULIPs offer tax savings regardless of the investment assets you choose.
ULIPs have the potential or capability to give better returns than any other investment product, and the primary reason is the various benefits along with tax exemptions. In the case of ULIPs, the premium paid by an individual is invested in various asset classes through different funds. Added to that, ULIPs take care of tax savings as well. ULIPS are flexible as there is always an option of switching funds during the term. However, generally low risk appetite investors should go for low cost ULIPs.
4) Setting Right Expectations
Whenever any person invests, there is always hope of getting back maximum profit. In the share market, a person with the short sighted expectation may be heartbroken very soon. The truth is, there is no point in gauging personal financial goals based on inflated or unrealistic assumptions.
Consistency is another thing which is very uncommon with stocks. An individual who has invested in stock should not expect consistent returns from time to time. And believing upon rumors can only invite downfall for a person in this segment.
5) Diversification of Portfolio
One of the basic aims of investing in stocks is to diversify assets. Be its assets or accumulated capital or wealth – the key approach should be to get an optimum return with diversifying of the portfolio. Anyhow, the level of diversification cannot be compared between two individuals. The reason is simple – no two persons have the same risk-taking capacity. Expert advice can be taken in this case, but the choice is personal. As an example, I keep advising that one should invest in diversified mutual fund schemes for long term instead of simple equity funds.
6) Don’t Try to Time the Market
This is yet another significant angle which needs to realize by individuals who are keen to explore the equity market with greater understanding. Buying a share when it has reached the bottom or selling it when it is at the peak – doesn’t work at all. This is one formula which shouldn’t be forgotten. There is no point in losing hard earned money in false judgments.
7) Relying on SIPs as Dependable Option
Systematic investment plans (SIPs) are no doubt convenient and efficient way to invest in the equity markets. There are ample cases or examples where mutual fund investors who have started SIPs in equity funds have got decent returns. Often people criticize SIPs for poor returns, but that happens when funds under perform. As a mode of investment in the equity market, SIPs are indeed dependable. Invest in SIP Mutual Funds for medium to long term to reap the benefits of mutual funds.
8) Opting A Disciplined Investment Approach
The equity market has got its own pattern of functioning. Volatility is general with market risks and losing money is something which happens to every individual who is in the domain for a considerable amount of time. Thus, it is advisable that individuals follow a disciplined investment approach, keeping in mind the long-term picture of the outcome along with the benefits.
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Ways to Benefit from the Indian Equity Markets Safely