There are many rules suggested by expert stock traders. We start with the most important general rule for investing in NIFTY and other types of stocks – the first general rule is don’t invest in the stock market when you have heavy debt.
There are ways to tackle it even under stress of debts but stocks being speculative investments it is highly recommended to avoid investments when EMIs are to be paid every month.
Rule 1 Understand Basics
What is Nifty?
Let us start by knowing What is Nifty ? NIFTY is an Indian index introduced by NSE, the National Stock Exchange in 1996. It is a combined word of National Stock Exchange and Fifty coined by NSE. The NIFTY 50 is a benchmark index of Indian stock market that list the weighted average of 50 of the largest Indian companies represented on the National Stock Exchange.
Rule 2 Think Before You Invest
If you are tax aversive then there are tax free shares in which you can invest; NHAI, HUDCO, NABARD and PFC. Another way to enjoy the tax-free return is by slowly paying off your debts. If you are heavily debt, then your effective tax saving would be higher than taxable returns if you prefer paying off debts. Some exceptions in such scenarios are; paying into your retirement fund while you have an existing home loan.
Rule 3 Invest in Seeking Knowledge
Seek expert’s advice in making financial planner for your stocks investment. You have to pay price for a good advice. Nothing comes free or cheap if the quality of service is good. You will recover more than the consultancy cost if you earn following the advice religiously.
Implementation of advice to the execution point is very important. This way you gain experience. The experience stays with you forever slowly making you an expert in stock trading. However, few words of caution for you before selecting a qualitied expert advisor. Do not join classes of experts that claim to make you smart traders in few hours of training, completely avoid them. Instead avail services of an experienced financial advisor who has immense knowledge of stocks, bonds, loans, pensions and insurance products. Practically learn with him while investing on real time basis in stock market. Standalone theoretical classes never help in real world.
There are many certified financial planners accredited by the regulatory bodies and financial planning institutes. Speak to their past clients individually, ask for their personal experience then make a decision. Get couple of online sessions with financial advisor then verify his advice with prevailing conditions in stock market.
Always remember, a good advice is worth its value even if it costs you heavily at the start. It is as pure as 24 carat gold whose value never diminishes, at the most you can use it as jewellery similarly, you can use your knowledge as financial advisor later if you failed to make career in earning money in stock market.
Be relevant and seek advice from qualified professional. Be practical in your approach just like you would not go to a dentist to have your hairs dressed, you need a barber for it similarly why would you go for theoretical knowledge when you are planning to invest in stock market on real time basis. Investing on a qualified financial advisor of stocks is worth every rupee.
Rule 4 Save for the Rainy Season!
Maintain an emergency cash fund. When you seek career in stock trading it is important that you have allocated few months for getting trained while absorbing loss of money. Stocks being speculative you do not make big profits from day one. Ideally, it is recommended to have emergency fund equal to six months’ income. This way you can invest worry free your spare money in stocks. You can take even risky decisions on few volatile stocks.
Rule 5 Understand Difference Nifty vs Sensex
Nifty vs Sensex: Nifty 50 comprises of the top 50 companies whose stocks are actively traded in NSE. Sensex constitutes top 30 companies whose stocks are actively traded in BSE.
Nifty is seen as a broader market index that covers majorly 24 sectors. While Sensex covers 13 sectors of the market.