The stock market has been a trending topic for the last couple of years in Nepal. Just over 1 million people have invested in the share market in Nepal.
People have started to invest more and apply for IPOs more. There are currently 30,61,668 Demat accounts in Nepal.
So with this mass entering into the stock market, many beginners are clueless and don’t know where they can be guided properly as there are fewer platforms to learn the stock market in Nepal.
We are going to talk about the 7 best investment tips for beginners that can help them while investing in the stock market of Nepal.
With these 7 investment tips, anyone who is a beginner in the stock market can get a brief knowledge about how risky the stock market and what is the proper way to invest in the stock market of Nepal.
Is investing in stocks risky?
As one of the most successful investors in the world, Warren Buffet says “Risk comes from not knowing what you’re doing”. So yes, there is a risk when you invest in the stock market, every stock comes with a risk.
But if you can understand your stock properly and invest like a pro, you can get away with the risks and gain profits.
Bonds are safer than investments in a way, but the returns are higher in investment. When Investment in different companies you can experience some risks at a higher stage and some at a lower.
So how can we determine where is more risk and where is less?
We can put a simple method to analyze this, for example: if a company is of high profile then it will have fewer risks and if the company has a low profile, then it will have higher risks.
In other words, if a business is from a developed country with a high economy, then the company stocks are safe and if the business is from developing the company’s stock is unsafe.
You should understand the risks that come with investing in the stock market and know your capacity to bear the risk. You should have patience especially when a bull or bear situation is going on in the market. You should not panic selling or over-buying the stocks and by understanding your potential and analyzing how the market works you can minimize your risks and enter into the market like a pro.
7 Investment Tips for Beginners to Start Investing
We talked about how much risk there is while investing in the stock market, now let’s talk about how you can invest in the stock market with the help of 7 investment tips for beginners.
1. Manage your finance
The first thing you need to do before investing your money in the stock market is to manage your finance. You have to set your amount according to your investing goals and by understanding the risks that come with it.
keep the investment money aside, do not invest all your money in the stock market, and save some emergency funds to analyze how much is needed, and for how long.
For instance, you can use the 50 – 30 – 20 method where you can use 50% of your income in your fixed expenses, 30% of your income in the variable expenses, and use 20% in the saving and investments.
After planning your finance you can be fully prepared for a planned investment.
2. Make your strategies [Investment Goals ]
You need to make a proper strategy on how you are going to invest in the stock market. Recognize who you are, a trader or investor, and plan your strategies according to that.
A trader is someone who invests to gain the highest amount of profit in a very short period.
An investor invests for a very long time from which they can also get bonuses and dividends.
You can get the latest news and announcements of the companies that are publicly listed in share markets news portals like Sharesansar and Mero Lagani.
Researching once or twice is not enough, you have to review them frequently to understand the market trend.
3. Proper Analysis
Do not listen to the rumours that are going around the market this is not a proper way to analyze your stocks. You have to understand and implement the right approach which is fundamental and technical analysis.
- Fundamental Analysis
Fundamental analysis is done to understand the real value of the stock, whether it is overpriced, underpriced, or fairly priced. The fundamental analysis is used by many investors to understand the stock of a company.
The fundamental analysis mainly looks over a company’s financial statement, its core management team, its competitors, future strength to grow, and the overall industry.
Fundamental analysis helps you to choose the right company stocks to buy or invest in. This is a proper way to analyze the stocks of a company before investing in it with the data related to the company, not the rumours that are around us.
- Technical Analysis
Whereas fundamental analysis is more about analyzing a company’s growth potential by its current financial statements and overall performance. Technical analysis is more about analyzing the chart’s patterns and volume to predict future trends.
Technical analysis is much different and a bit more complex than fundamental analysis. Technical analysis uses maths and statics more, it studies the chart pattern and statistical figures to analyze the future stock price.
In technical analysis, we see the trends and charts of the stock prices of the past and current year to predict the future direction.
With the help of technical analysis, we can grab the trading investing opportunities in the growing companies.
Fundamental analysis will tell you what to invest and Technical analysis will tell you where to invest.
You can use free websites like Nepse Alpha for technical analysis.
4. Keep your portfolio diversified
You might have heard the famous saying, “Don’t put all your eggs in one basket” This means you should not invest all your money in only one stock and depend upon it for a long period.
You should diversify your stocks, and buy from different well-doing companies. Doing this might be a bit intimidating at first but will help you in the long run. You should diversify your portfolio because it will minimize your risk.
If you invest in different stocks of different companies then if one’s stock value is decreased other ones might be increased and your overall portfolio will not be affected much.
For example, if you put all your money into one company and that company gets bankrupt, you will lose all the money you gained as a profit and the money you invested in it.
So diversifying your profile by buying stocks of different companies can save you from having a more significant loss.
5. Choose the right stock price at the stock value
First, you need to know how the prices of a stock are determined. The value of stocks goes up or down based on how many people want to buy them and how many people want to sell them.
So there might be a situation where due to the high or low demand and supply of the stocks, the stock price might be falsely determined or not to its real price.
For example, Bitcoin’s price is determined by its demand and supply in the market, its cost of production while mining, its competitors, government regulations, and various other factors.
So Bitcoin’s price might not be at its actual value most of the time, you have to do the proper research to know its actual worth.
Warren Buffet has quoted “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.
So you need to analyze the real share price of the company by seeing the yearly growth, its expected return, and how rapidly it is growing.
Do not choose the company’s stock by seeing its price. You should always choose the company that has its worth and potential rather than a company not performing well but has a lower stock price.
6. Invest and Reinvest
Firstly to reinvest, you have to invest your money in a good company, we have already talked about how you can analyze and choose a good company.
Reinvesting can be a great idea for anyone who wants to earn more in the long term. Reinvesting your dividends can pay much more than it’s paying right now, you can reinvest your dividends in the same company and you can get more dividends next time which means you can buy even more shares and the cycle keeps going on.
Although taking the cash may seem like a good idea, reinvesting your dividends can result in greater returns in the long run.
But you can also choose not to reinvest if you want to keep your portfolio diversified or think the company isn’t worth reinvesting.
You should also look at the market if it is bull or bear, if the market is going down which means the market is facing a bear situation then reinvesting your money might not be profitable. But in other cases reinvesting can give a higher return in the future.
7. Keep track of your stocks [ Prices, Commissions and Fees ]
After you have invested your money in the stock market, You have to keep track of it.
When you buy a share of the company, you become a shareholder of the company so you are responsible to keep yourself updated with the company’s news, announcements, and performance.
You can’t just buy and forget in all cases, you have to keep tracking your stocks because there is no guarantee that a company’s stock can do well all the time.
It might go through some ups and downs, you might lose a great opportunity to sell or buy more. But of course, if you can analyze the company’s growing strength in the long term you can buy and forget.
You can also use Smart Wealth to manage your portfolio, do company analysis, technical and fundamental analysis, and many more. If you want to try Smart Wealth you can visit the website, and use the promo code “DIGITGRK” during checkout for the discount. This is a DG special discount in collaboration with Smart Wealth Pro.
Conclusion
The Nepalese stock market is flooded with investors and traders, some are experts, some are intermediate, and some are beginners. These investment tips can be very helpful for someone who are a beginner or has been investing in the Nepalese stock market for a while. 7 investment tips will guide you on how to invest in the stock market of Nepal and give you insight into how each factor work.
