Imagine you are a small-time stock market investor for a long time. The stock market is gaining momentum, and your SIPs are multiplying double. Suddenly, there is some political imbalance, resulting in a market crash. You might be hopeful that the market will bounce back, but you are worried about getting all your earnings wiped out somewhere.
You are not alone in witnessing such scenarios. Many more experienced and new stock market investors need help with such setbacks. To avoid such situations, it is better to follow some strategies that could maximize your stock market returns. Also called investment strategy, you must be ready with the proper steps to help you return after a certain setback. No matter which best trading app in India you use, following specific strategies is a part of stock market investment.
Top stock market strategies to maximize your returns:
Whether you are an expert or novice investor, the following stock investing advice should be pretty beneficial for maximizing your profits in the stock market:
- Buy and Hold
The buy-and-hold method is consistent in the stock market investment strategy. As the name implies, you purchase an investment using this technique and hold it for an extended period. Though it’s ideal never to sell your investment, you should aim to hold onto it for three to five years.
By adopting a buy-and-hold approach, you don’t have to hold on to active trading that lowers most investors’ results by concentrating on the long term. The long-term performance of the underlying stock determines your chances of success. This allows you to understand which stock gives you enough return and with initial investment.
This is the best strategy you can have rather than adopting the traditional method where traders have to keep watching on the screen and stay worried about the price factors.
- Determining Point of Entry and Exit
When you engage in the stock market, entry and exit points are one of the important strategies to follow. However, incorrectly timing a stock purchase or sale can lead to significant losses or, at the absolute least, poor profits. The best is to do a technical analysis that helps to determine the ideal time to buy and sell an item.
Doing technical analysis is a part of determining points of entry and exit. It further allows you to identify investment opportunities. This includes analyzing trend lines, moving averages (MA), and candlestick patterns. You will be able to identify the points of entry and exit of an asset by understanding the approach, further allowing you to enjoy profits.
- Rebalancing when the Market is High
Verify whether your portfolio’s equity allocation has increased when the market rallies. The portfolio may turn volatile and riskier if the equity percentage shoots up. If so, you should rebalance your investments to return them to the initial level at which you feel comfortable.
For example, your portfolio size is Rs 10 lakh; out of the total, you need 60% of the portfolio invested in equities and the rest 40% in debt. Furthermore, the equity portfolio is divided into 35% large-cap and 20% mid-cap and 5% small-cap. This further defines that Rs 3.5 lakh is in large-cap, Rs 2 lakh is in mid-cap, Rs 50,000 is in small-cap, and Rs 4 lakh is in debt.
- Invest as per the Support and Resistance
This is another stock market investment strategy you can follow to maximize your support. There are different supports and resistances for each asset. A level of resistance is where the price of an asset will not rise, while a level of support is when the price will not fall.
You can use the knowledge about your asset’s support and resistance levels to design a transaction that maximizes your investment’s earnings. For example, you can pause purchasing an asset until its price drops to its support level. Alternatively, you could sell the asset when it hits resistance and take your money out of the asset altogether. This simple advice could increase your chances of getting well paid.
- SIP Investments
You cannot time the market accurately because of its changing nature. What if you know that thorough asset analysis and market timing are unnecessary for building long-term wealth? It is true. If you decide to invest in the stock market using a Systematic Investment Plan (SIP), there is no worry about market timing and buying for a better return.
In SIP, you must keep investing an amount in an asset—stocks or mutual funds, either for long-term or a specific period. One of the benefits of SIP investment is rupee cost averaging, which reduces the overall cost of your investment and helps you maximize your returns.
- Being an Active Investor
Active investors are those who like to take advantage of market swings. Technical analysis, which studies historical market data like trading volume, is a tool stock brokers use to predict future market values.
In addition to momentum and event-driven methods, active trading includes several pricing-based tactics, including spread trading. The goal of momentum investing is to identify the current trends, which aims to capitalize on market emotion. Event-driven investing strategies aim to identify price discrepancies during corporate transitions and events, including mergers and acquisitions or a bankrupt company.
How to Get Started with the Best Trading Platform in India?
Since we have covered multiple tactics to maximize your return on the stock market, the best is to use the right platform where you can do strategic trading. Choose the best trading platform in India and open your demat account and trading account under which you can stock trade. A reputable platform will help you in every step of trading, and you can sit back and relax without worrying about the market’s volatile nature. If you are a beginner, you must seek assistance from a professional trading platform.
Getting started with investing might be challenging, but you don’t have to worry when you have the best trading platform by your side. Follow the above-mentioned strategies that can further help you in stock investment.
