Firstly, let me clear out one thing - when someone tells you that an IT company X is going to be the future Infosys or retail company A is going to be the next HUL, simply smile and say - ‘’Sure’’
A future Infosys, never looks like an Infosys today. A future HUL never looks like a HUL today. No one knows how the company will look like 5 years down the line. Not even the promoters. If they did know, wouldn't every company have 75% promoter holding? Think about it :)
Let me add on some views which might help you to become a better trader
1..Save ,Invest and Let it Compound
Buffet is 85 years old and has been investing since he was 11 years old. Buffet made only 1% of his wealth since he started until he turned 50 years old..The last years have the biggest ratio of the total capital and when looking at the end of the investment plan, today with 85 years, he made more profits this last year than the total equity he had when he was 70! Its a exponential curve upwards when you compound. This is how compounding works. True compounding only happens when you save and invest! The saving part is the true holy grail of the equation.
2.Diversification :
Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. .
Investment Diversification Purpose
The purpose of investment diversification is to reduce unsystematic risk.
Unsystematic risk, also known as "specific risk”, or "residual risk," is the type ofuncertainty that comes with the company or industry you invest in. Unsystematic risk can be reduced through diversification.
You might have heard the expression
“Don’t put all your eggs in one basket”.
If you own only one asset category, or one individual stock, you will be exposing your portfolio to great harm.Unsystematic risk can be nearly eliminated through investment diversification. Unsystematic risk is specific to an individual investment or industry and is not correlated with the market. Therefore if you don’t participate in diversification you are taking unnecessary risk that you will not be compensated for.
3.Risk Reward Ratio
Most of the people concentrate only on the profit generated on every trade,but it is important to understand the concept of risk involved. Risk is the amount of money which you are going to lose if the trade goes wrong. So a good trade should have risk reward ratio of atleast 1:2
For eg.You enter nifty buy at 8600 with stoploss of 8580(risk taken 20 points).Then your profit target should be atleast 8640(reward of atleast 40 points)
What is more important is you need to know to review your investments for every 5 years.
- HCL ( IT Sector)
- ITC ( FMCG Sector)
- Yes Bank ( Banking )
- Manappuram finance ( A progressive Growth story)
- Eicher Motors ( Auto sector)
- Sun Pharma (Pharma Sector)
What is more important is you need to know to review your investments for every 5 years.
