Simple and Effective Secrets to earn higher returns in the Share Market

 

 

Simple and Effective Secrets to earn higher returns in the Share Market

I am writing below points considering those investors who want to invest for long duration to achieve above normal Return on funds saved from their hard earned money:

1.       We need to have patience. Don’t panic when market is down or is in declining trend. Since Ups and Down is a very common and regular feature of Share market depending upon various factors.

2.       Don’t follow the tip – Don’t take decision only on the basis of free advices we got here and there, but follow the Trend – Past track record of Index, Mutual fund, Asset Management Company of a MF, Particular Comapny.

3.       Diversification of investment is very important:

-          15-20% of portfolio should be invested in Debt Funds, Bank FD’s (Very Less Risky Assets)

-          Not More than 25-30% of portfolio should be invested in Small and Mid Cap shares/funds (High Risk Assets – High Volatility).

-          40-50% of portfolio should be invested in Large Cap/ Blue Chip Shares/Funds (Less Risky assets – Low Volatility).

4.       In Mutual Funds, Always opt for Direct Funds. Investing through broker / banks will charges you commission from the amount invested which can save you lakhs of rupees.

5.       In Mutual Funds, Growth option is recommended unless regular source of income is required for daily needs considering reinvestment of dividends earned and taxation impact.

6.       In the Long Run, Share market will definitely rise and that too at above normal Rate. In Last 20 year’s sensex has increased with annual rate of 12 – 15 %. Stay invested unless there is an urgent requirement.

7.       Market Price Earning Ratios generally ranges b/w 10-30.

-          When it is around 25-30 (Means Market are on higher side and shares may be overvalued), then we should divest from market if required since we get good prices for our shares.

-          When it is around 10-15 (Means Market is on lower side and shares are undervalued), then we should Invest in market if surplus amount is available for investment since we get shares in cheaper rates.

-          Please also read article on PE Ratio “What isthe Right Time to Invest in Share Market?

 

8.       Bull Run in the market means when Share prices in general are on increasing trend. This is the time when we should sell our shares/units if required.

9.       Bear run in the market means when prices in general are on declining trend. This is the time when we should buy shares/units (Addition to the investment) from the amount which is kept aside for investment.

10.   I don’t recommend SIP i.e. Systematic Investment Plan for investment in Equity Mutual Funds Since it averages the return due to the reason that it sometime buy at cheaper rates and sometime at expensive rates. And In my Opinion Lumpsum Amounts in MF Units should to be invested when market is down.  Meanwhile surplus Amounts can be invested in Debt Funds where there is no exit loads i.e. no charges on withdrawal.

Disclaimer – Share Market and Mutual Funds are subject to Market Risk. Please read the offer document carefully. Do thorough research before investing.