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1. Look for diversification in your portfolio Diversifying your portfolio goes a long way in giving you good returns. Risks and investments go hand in hand. Hence, as an investor, it’s important that you do not put all your eggs in one basket. You can diversify your portfolio by investing across various types of different investments of varying risks and returns such as mutual funds, bonds, stocks and ETFs. It is because, when one of them underperforms, there’s a chance that another asset class will perform well and balance out the resultant losses. Diversification helps smooth out the volatile roller coaster of investing and helps you stay invested with stable returns.
2. Invest according to your financial objectives To get the desired returns from stock market investments, it’s important to invest according to your financial goals. You can choose different instruments for your short term and long term goals. e.g. for your retirement, you can invest in stocks and bonds as a long term investment. On the other hand, for your short term goals, look for instruments that allow you to withdraw in a short period of time. You can choose short term investment options which provide you safety, liquidity and better returns on your investments.
3. Choose instruments that sustain the market volatility. However, before choosing an investment option, ensure that you fully understand the risks associated with it. While looking for investments in stock market you can opt for defensive sector stocks which acts as safety nets during a bearish market and can balance your portfolio in a retreating market. They are also beneficial as an investment as they pay annual dividend thereby reducing your initial cost.
4. Invest in mutual funds
As a beginner, if you wish to invest in equities but lack the required knowledge and experience, you can invest in mutual funds. Mutual funds are professionally managed investments funds that pool money from the investors to purchase securities across different companies and asset classes. Mutual funds are a diversified basket of instruments that help you invest in schemes of varying returns and risks. As these are diversified, the loss of one instrument is neutralised by the profit of other, thus reducing the risk factor of your investments
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