Investing in stocks would be a great way to build wealth. While many people think that getting into the market is too complex, it actually is pretty easy. Stock market investing has become extremely simple over the years, and there are multiple ways to do it. Kavan Choksi UAE mentions that people interested in investing in the market can simply open an online brokerage account and buy stocks or stock funds. In case they are not comfortable in doing so, one can always work with a professional to manage their portfolio.
Kavan Choksi UAE underlines a few factors that newbie stock market investors should keep in mind
“Time in the market beats timing the market” is a common saying among savvy investors. It basically means that one of the best ways to make money in the stock market is to adopt a buy-and-hold strategy. In this strategy, investors would hold stocks or other securities for a long time rather than engaging in frequent buying and selling. Doing so would be a smart move as investors who consistently trade in and out of the market on a daily, weekly or monthly basis often end up missing out on opportunities for strong annual returns.
Almost all seasoned investors consider diversification to be the key to lowering risks and boosting returns in the stock market over time. In many ways, it is the investing equivalent of not putting all of the eggs in one basket. While the majority of investors tend to gravitate toward two investment types, individual stocks or stock funds like mutual funds or exchange-traded funds (ETF), opting for the latter is especially advantageous for maximizing diversification.
Even though investors can choose to buy an array of individual stocks to emulate the diversification they would find automatically in funds, doing so would require time and a good amount of investing savvy and a sizable cash commitment. After all, an individual share of a single stock may cost hundreds of dollars. Funds, on the other hand, allow investors to buy exposure to hundreds or even thousands of individual investments with a single share. Kavan Choksi UAE says that for the best possible outcomes, investors should try to invest in funds that passively track major indexes, like the NSE Nifty or BSE Sensex. Doing so shall position them to benefit from the approximate 10% average annual returns of the stock market as affordably and easily as possible
There are many companies that pay their shareholders a dividend, which basically is a periodic payment based on their earnings. When one just begins with their investment journey, the small sum of money they get paid in dividends may seem negligible. However, it is vital to understand that these dividends are responsible for a large portion of the historic growth of the stock market. Nifty 50 has had around 12% returns since inception. However, when dividends were reinvested, this percentage jumped to almost 16%. This happened because each and every dividend reinvested by the investor enabled them to buy more shares, which ultimately helped their earnings compound a lot faster. Owing to this enhanced compounding, it would be a good idea for investors to reinvest their dividends rather than spending them when they receive the payments.
