Stock Market Experts Offer 7 Tips for Better Returns on Investment

Amidst the pandemic and the lockdown, the economy is staggering. Yet, the stock markets are performing well. At the same time, investors are confused as to where they should put their money and how they should invest it – especially the small investors who are the worst-hit by the present economic situation.

Shankar Sharma and Devina Mehra, co-founders of First Global Securities, speak exclusively to The Quint's Editorial Director Sanjay Pugalia. The experts discuss the surge in the global stock markets and advise new retail investors on how to invest their money to get the best returns.

How is the Market Growing Despite the Shrinking Economy?

Sharma says that the assumption that the stock market is a measuring instrument of the country’s economy is quite outdated. In fact, it is the barometer of success of a few powerful companies, which emerge stronger because of the suffering economy, and the market just reflects their growth.

Mehra says that the surge in the markets has been observed not only in India, but globally. The reason for this might be the rallying up or correction of the sharp fall in the market that occurred in the past two to three months. Even today, the basics of our economy are loose, she said, adding that the companies that are growing rapidly now have faulty basics and as a result, there is a risk.

What Would Be a Safe Bet for New Investors?

Both experts are of the opinion that one should not depend solely on trading income for their livelihoods, because losses while trading are inevitable. Here are some tips reiterated by them as to how to play the trading field without taking huge risks:

• Keep monthly savings separate from trading investment.
• Know that losses are unavoidable.
• Invest in winner companies, those which have their fundamentals clear and strong.
• Do not invest in loser companies, even if they show rapid growth initially. Steer clear of Banking and Financial sectors since they are majorly hit.
• Do not put all your money in one or two stocks. Portfolios should have 25-35 stocks. Do not invest more than 2-4 percent of your money in one stock.
• Do not put all your money in just equity bonds. Invest in gold, other commodities or government securities. Focus on asset allocation.
• Expand your investment arenas and put money in global markets. If one country’s economy collapses, you can find retreat in another.

Retreat After Facing a Loss

The experts advise not to delay the process by waiting and not even wait for a break . If there is a better opportunity for investment then one should go for it. According to Sharma, digital, chemical, and pharmaceuticals are good and stable arenas for trading at the moment.

Ideally, one should have at least 25 stocks in one’s portfolio. As a citizen of India, one will already have several investments in the form of real estate, fixed deposit, PF, etc. Expansion of investment horizons to global markets is necessary. Even in the time of crisis, people need to keep their eyes open and invest, the experts end by saying.

Watch the video above for the full discussion.