Investing is thought to be a job for a highly qualified, trained and veteran professional who has seen the ups and downs of markets, and has come out of the downs in green. Complex valuations, insider news, contacts with large investors, high value trading, etc. are some thought-to-be pre-requisites for one to make money in the markets.
If you are the one who has links to the latest buzz in the market before anyone else, then you are gifted with profitability and success. But for a moment let's try to think of just one question - Is it really tough to earn some decent money in share market? But the question is not very difficult to answer.
What most retail investors want to do is make a fortune within a short span in the markets. If that was possible then everyone would have been an investor. What we need to understand is that markets can be very rewarding for some and sometimes. For a common investor they can definitely provide a return which is worth putting money in the market.
Equities work in the most mysterious ways and are much more difficult to digest in hindsight. The first part indicates the fact that we often may not see a stock being robust, in terms of numbers, when the markets are making new yearly highs.
Derivatives, futures and options are another way to make money. People do trading in derivatives for hedging and speculation. If you think that derivatives are something that tosses your mind every time you tdery to understand them, then stay away from them.
No point putting your money in a game when you can't even play it. In case you are fine with what these instruments are, how to trade, how much investment is required and what the risks are, then you can use them as an effective tool for portfolio management. As an investor, you should always gauge your maximum downside. Derivatives become worrisome when we see markets going one way - up or down.
Usually retail investors buy/sell Nifty or Sensex lots and sell/buy them after a descent gain. But what if the markets are going up/down and not providing an opportunity to reverse your position. Being in the market, one should not be hesitant to accept losses but the maximum loss can be limited with some due consideration.
For professional investors, fundamentals and market variables have an important bearing as they have to justify their positions to their investment committees or boards.
To earn a decent return might not be a very difficult task if we can do a bit of common sense investing.
Source :Rediff Business
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