The everyday northward and southward movement of the stock market leaves many of us wanting to make some quick short-term gains on the SENSEX. Businesses and entrepreneurs are no different. When the going is good, a rising bourse can be a good source of the much-needed funding for your new/small business.
Especially, when you have plans to grow it with newer portfolios in the near/ middle term. But stock markets have always been a sticky place. It may or may not move as per your calculations and analysis. Hence, you need to tread extremely cautiously. We discuss below some of the Dos and Don’ts when it comes to eyeing the stock market for some serious investments.
Stock Market Investments – What Are the Dos?
1. The first and foremost step is to calculate your total corpus which you can set aside for investments. This calls for preparing your Cash Flow Statement and Your Fund Flow Statement. You need to set aside the money that you will need for everyday operations. This is untouchable. Once you have calculated the quantum of the non-operations fund, divide it further into short-term funds and long-term funds.
Keep the short-term funds in the bank – this is the liquid money that will be available to you in any contingency. The long-term funds, on the other hand, can be invested so as to earn higher returns for your business.
2. It is extremely important that you don’t invest the entire long-term funds in the stock market. Assign a proportion (talk to your financial advisor on a judicious ratio) and take only a portion of the funds to the stock market. It is not without reason that our elders said, “Don’t put all your eggs in the same basket.” Thereby meaning, that if at all your stock-market bet fails, you wouldn’t have lost all your money.
3. The stock market is known for its upheavals. In order to even think about investing your hard-earned money there, you need to be aware of the workings of the market. Hence, read important publications regularly, stay updated on how the stocks are moving and keep yourself aware of the global economic pulse.
4. Consult your financial advisor for every decision you may want to take regarding investing in the stock market. In the same way, discuss with your close friends and networks in order to get a wider perspective. Always take measured and qualified steps here.
Investments – What Are the Don’ts?
1. Do not be driven by greed. True, some people make a whole lot of money by betting on the stock market. However, let that not drive you to take a hasty step which you may regret later. 2. Do not go by a single judgment, be it an article in the newspaper/ magazine or a company announcement. Consult several information sources and consult others who are in the know-how of stock market movements.
3. Remember, the stock market is not your business. Hence, do not allow it to take up all your time and resources. Give it only that much time as much it is necessary to make a good investment decision. Then go back to managing and growing your business.
A Word of Caution: The stock market is not for everybody. If you are not made for predicting how the markets flow, or if you don’t even understand it and the jargons associated with it, you are safe investing in safer options. What is your opinion?