We were a closed economy till 1990 when we had to face a serious balance of payments crisis and we had to embrace liberalisation. We had a drastic shift in our trade policy in 1990 when P.V.Narasimha Rao was Priminister. We have seen tremendous inflow of funds, over all growth, growth in employment opportunities, increase in exports and a good share in service sector after we have changed our policy.
Now, India is one of the fast growing nations in the world along with China and Brazil. Along with this GDP growth and over all growth, investing in Indian Secondary Market and also Primary Market has grown. Its true that we have been seeing many frequent fluctuations and it is very difficult to predict as to what happens in the world as this recent market fluctuations are driven by inflow and outflow from FII's.
Despite market being uncertain, everybody is interested in investing in sharemarket. There are inistitutional investors like mutual funds, long-term investments and also retail investors. We need not think about the mutual funds and the people who invest in market as long-term investment.
There are students, employees and the regular traders. Among the retail traders, there are some experts and some are driven by encouragement and news from others about the potential of investing in market. But, many new retail or small investors lack direction as to how they can invest in market. What this small investors do is that they will buy when market is going up and they sell when the market is going down. But, the experts prefer to follow the Buffet's principle and buy when the market is going down and sell when the market is going up.
But, it is not advisable to anyone to investment in market and do trading without having an understanding about the market and how the system works. When the company is in a good position and it is likely that the company earn profits in the near future, then, expert investors invest in that company and its true even for the small or retail investors. So, its all about company doing good. How come we can learn that the company will do good? is question. And, logically, it is very difficult think or predict the futrue of a comapny as it depend upon many things like government policies, foreign market, international events, political stability, the company's management etc. When there is a news that Barrack Obama is going to hit our outsourcing business, the sector has not done well in the market and its logical. Thus, its all depend upon the thing as to whether a particular company will do well or not.
What this new retail or small investors do is that they will look at the graph and if the price is going up, then will buy. When the graph is going down, then, they will sell or otherwise, they will listen to some experts and their friends. But, its not a good thing to invest like this. There are some simple tips to make investment in market more meaningful and systematic.
What this new or small or retail investors should do is that:
a) develop the habit of reading news papers and especially the political and business issues;
b) should concentrate on the expert views or important views about a particular industry and standard news papers can be a source;
c) select a sector which is likely to do well in the near future;
d) look at the expert views on the performance of a company through magazines and other reliable sources;
e) look at the management, their background and the brand name.
With the simple steps referred to above, the trading in stock market can be meaningful and systematic. If one knows the basics as to how to invest in market and how the entire system works, then, it will boost his confidence and even if one sustain some loss, he will not loose confidence and continue investing.
Note: I request the readers to express their views in simple way as to how to invest in market.