Kavan Choksi / カヴァン・チョクシ Shares a Few Tips for Beginners Investing in the Stock Market


Over the years, the stock market has created an enormous amount of wealth. Historically, stocks offer higher returns in comparison to alternatives like gold or bonds. Kavan Choksi / カヴァン・チョクシ points out that stocks generally outpace inflation, thereby safeguarding wealth over the long term against the erosion of purchasing power. Market time generally matters less than time in the market. Staying invested is vital for long term success.

Kavan Choksi / カヴァン・チョクシ provides a few valuable insights for newbie stock market investors

Purchasing the stock is much easier said than done. Any person can find out which stocks have performed well in the past. However, anticipating the performance of a stock in the future is a lot more difficult. Investors who want to build wealth by investing in individual stocks need to put in efforts in analysing those companies, and effectively managing the investment. When analysing a company with the goal of investing in its stocks, it would be prudent to look at its fundamentals, like earnings per share (EPS) or a price-earnings ratio (P/E ratio). Investors also need to analyse the management team of the company, study its financials, and evaluate its competitive advantages.

Simply buying stocks in one’s favourite company is not at all the right way to invest. People must also not put too much faith in past performance as it is no guarantee of the future. It is crucial to study the company and anticipate what might be coming next.

Many newbie investors have unrealistic expectations about the kind of returns that they can make in the stock market, or they end up confusing luck with skill. While one can definitely get lucky sometimes when picking an individual stock, being lucky over time and consistently avoiding big downturns is uncommon. To consistently make money in individual stocks, investors need to know something that the forward-looking market is not already pricing into the stock price. After all, for every seller in the market, there is a buyer for those same shares who is equally sure they will profit. Hence, it would be prudent for many investors to opt for an alternative to individual stocks is an index fund, which can be either a mutual fund or an exchange-traded fund (ETF). These funds can hold hundreds of stocks.

Kavan Choksi / カヴァン・チョクシ mentions that one of the key advantages of an index fund is that it allows investors to have a range of stocks in the fund at once. For instance, if a person owns a broadly diversified fund based on the S&P 500, they shall typically be owning stocks in hundreds of companies across many different industries. Investors may also choose to buy a narrowly diversified fund focused on one or two industries. Diversification is vital in stock market investing as it lowers the risk of any one stock in the portfolio hurting the overall performance in a significant manner. In fact, having a diversified portfolio can also improve the overall returns of an investor.

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