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BSE Sensex touched the magic mark of 20000 on Tuesday 15th January 2013. Expectations with the market is increasing. Normal man is thinking to make it as an asset to earn profit. But it is not the market in which people enter and left the market with profit. There is no easy way to earn profit from share market. First you need to know about the market.

Here I am suggesting some basic tips for first time investor to play safe:

There is No Luck or by chance:

Retail investors must enter in the market with long term investment view. You need a big luck to earn profit quickly. Market doesn’t work like you invest money and get profit. It is difficult to work in short term basis. For this you need a lot of expertise of market and companies in which you are investing. BUT it is rather easy to invest and get consistent a small profit in long term basis.

There is always a chance that the market falls in short term and if you have invest your short term fund in that, then you need to exit from market with a loss. So always invest your long term fund in equity market so that if market down then you can remain in market and wait till market rises.

Look at large caps:

It is advisable for first time investors to look for large cap names. Because first normally they know about that big brands and they have some idea about that companies. Secondly mostly news channel and share advisor give analysis for these companies. Third price changes of these companies are less volatile then small companies.

However it is to keep in mind that prices of these companies can’t give you guarantee of high return. Moreover with all these information, one needs to understand business of these companies before investing.

Invest in small amount:

If you have decided to invest in good companies at long term basis still you need to keep in mind one thing. You must not invest all money at once. Divide your money in small parts, first invest first part and invest second part when you get confidence on that company. One more benefit is if rate goes down then you can purchase more share to balance your cost of that shares.

Diversify the portfolio:

Don’t invest your all money in one type of companies i.e. if you see real estate is going high then don’t buy all shares from real estate companies. Because if there is decline then your whole portfolio will be in loss. It is suggested to diversify your investment. For example: if you invest 1 lac in one company and you get 15% decline then your loss is 15000. But if you diversify your investment 20000 in 5 separate segments then if one segment get 15% loss then total loss is only 3%.

Learn about market:

Don’t be over ambitious in your first profit. You need to learn how market works. You can get professional approach by TV and newspaper. Increase your exposure as you gain experience. Never blind trust on tips given by broker, friend or other investor. Apply your mind because they can have their own agenda.

In the end, there is no set formula to earn profit from share market. But if you want to earn safe profit then they formula can help you in invest safely.

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Category Shares & Stock, Other Articles by - CA Prashant Gupta 



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