There are many ways to participate in the equity market. Some choose to invest through equity mutual fund, but some others find it more suitable to invest in stocks directly. When we say directly in stocks, it means they select individual stocks and invest through their stockbrokers. Always believe in something which gives you something new to learn. Equity investment is not like a jackpot where you might get everything you want in a very short period. If you are a new investor, learn about long term equity investment, and that will make your investment objectives much easier to complete.

Sometimes you get a chance to interact with new stock investors. The first time investor sometimes focuses on the return and do not understand the basics of stock investment. Recently I met with one such investor who now manages his family business and started investing in the stock market from this year. Although he began with a mutual fund plan to invest in the equity market, he also invested in one particular stock which recently going through a rough phase and almost lost 80 per cent value in the stock price in the past one year, a clear wealth destructor for retail investors.

A retail investor should not pick stocks based on expectations of high return. Instead, it should be based on stock fundamentals. An underperforming stock may not the right choice when you are a first-time investor as there may be a risk of losing further value in share prices, a scenario where you may get worried about your investment. Your expectations may sometimes force you to commit mistakes. It is always advisable to invest in a disciplined manner that will help you overcome market uncertainty and volatility. 

Equity as an asset-class always remains volatile, and you may lose partial or complete investment if you do not understand the risk associated with equity investment. Information regarding different investment products is so widely available everywhere that you may get confused. There is no readymade solution that will help you in fulfiling your investment objectives in specific quick steps. You must understand your investment objective, investment horizon and most important your risk-taking ability. 

Your first investment should start with quality stock that gives you confidence in terms of its business performance. You should remember that if a business can generate profit, then only it can create value for your investment.

You should not invest in any stock based on past performance. Sometimes the investor feels affection with one share based on past performance and wants to repeat the same whenever they find any opportunity, and in doing so, they ignore the current information available about the stock fundamentals.

Start with small steps:

Instead of going for lumpsum investment in the stock, an investor should start with a systematic investment plan(SIP) in stocks. Many stockbrokers offer this kind of facility where you may initiate Equity SIP, where a fixed amount will be invested in a set of stocks or a fixed number of stocks of your choice will be bought at regular intervals based on your instructions.

It is one of the best ways to build long term stock portfolio where you start by taking small exposure in stocks and find enough time to understand the stock market. If you have made the right selection, you need to show patience with your investment.

Anwesh Sachin is a registered investment adviser(RIA) 

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Disclaimer- The information and views shared here is not personal advice. I may have shared the same views with my clients. You should consult a SEBI registered investment adviser (SEBI-RIA) before making any investment decision.