Investing in the share market is risky and may lead to losses. We all toil hard to earn money. It is not easy to digest a loss.
Although, it is a good decision to invest a portion of our savings in fixed deposits. However, investing all of our savings in fixed deposits is not a sound decision.
Moreover, in the current scenario with rising inflation, the overall return on investments in fixed deposits is also negative.
Agreed investment in the share market is risky. Each day, the price of stocks fluctuates. Buying the right stock at the right price is a challenge. However, swimming in the deep water is also risky. We need to learn to swim or wear a life jacket before jumping into the water. In the same way, we need to learn the basics of the share market or hire an expert like Kuvera to be our life jacket and help us dive into the share market.
In this article, we will provide easy tips on managing risk in the share market.
Table of Contents
Before investing in a company, research the company, its line of business, and its competitors.
Invest in a fundamentally strong company.
Check the price-to-earnings ratio, market capitalization, growth in income, and trend of at least the last five years, etc.
Do the fundamental analysis of the company before adding it to your portfolio.
If you are short on time, you can go for the mutual funds’ services of Kuvera. To do a thorough fundamental analysis on your behalf.
Kuvera was founded in 2016 by Gaurav Rastogi, Mayank Sharma, and Neelabh Sanyal. Currently, 13 lakh investors have placed their trust in Kuvera, and it has 34,000 crore assets under administration from 3.8 crore transactions.
The Kuvera app is the best share market app. Once you download the Kuvera app and sign up, you are going to realize the same. You will find in-depth knowledge which will help you research the companies you want to invest in.
● Invest a minimum of 80% in mid-cap or large-cap companies
If you invest on your own as a retail investor, choose mid-cap or large-cap companies.
Although small-cap offers a lot of growth potential, they are also high on risk. Investment in a small-cap requires a lot more research than a mid-cap and large-cap. As a retail investor, you should not invest more than 20 % of your portfolio budget in a small-cap.
● Diversify your investment
Investing in a single stock is not a healthy decision for our portfolio. We should diversify our portfolio.
After thorough research, we need to choose the sectors and stocks and invest not more than 20% of our overall portfolio budget in one selected stock.
● Look for value, not price.
Don’t buy a share because it is trading at a low price or high price. Some stocks are traded at a high price due to news, or the stock may be a favourite stock of traders. If you are looking for a long-term investment, do a fundamental and technical analysis of the right price to buy the stock and try to stick to that range.
● Short of time to research, go for the direct plan mutual fund from Kuvera.
If you are short on time, rather than refraining from investing in the stock market, wear a life jacket and invest in mutual funds or hire a portfolio manager. And ask them to take care of your investment needs.
To sum up
Staying away from the share market is not the best way to manage risk. To manage risk associated with the share market, do thorough research on the company, diversify your investment, try to invest more in mid-cap and large-cap, look at value rather than price, invest with a long-term horizon in mind, and if short of time to research go for the mutual fund route.
Frequently asked questions
1. What is the difference between direct and regular plans in a mutual fund?
Regular plans are those in which you pay up to 1.5 % commission to the distributor. Direct plans help you save on that commission. Kuvera offers a direct plan and helps you save on commission.
2. Will I need to register multiple times to manage the accounts of my family members?
You can sign up once and manage your family members’ accounts in one sign-up in Kavera if you manage your family’s portfolio. You can register once and handle multiple accounts in one login. No need to sign up separately for each account.
3. Can you provide advice on stocks I can research?
Kuvera team has expertise in money management and advisory. For advice on the best stocks to buy, you can download the Kavera app, which is the best share market app, or visit Kuvera.in