Making money, and big time, is what the dreams of millions are made of. It is easier said than done. The path to success in the stock market is laden with pitfalls. Those who succeed are the ones who know when to check their greed and when to overcome their fears.
There is lot of discipline involved in successful investing. It is the art of buying at reasonable valuations and selling when prices enter the ‘bubble’ zone or when asset prices far exceed their fair valuations. An asset is believed to be fairly priced when it fully discounts its estimated earnings.
Here are some ways to make money fast as safely as possible.
Maintain your liquidity- Liquidity is of paramount importance for survival in the market. You can buy different assets only if you have liquidity. It is preferable to use your own funds to minimise your acquisition costs. Borrowed funds add to your costs and should be avoided. Remain fully invested only when you are more than sure about the primary trend in the market. If the primary trend is bullish it means the market will bounce despite setbacks in the shorter term of a few days or weeks. One way to stay liquid is to book profits regularly once your price targets are reached.
Hedge your positions– It makes sense to hedge your positions in the cash market. If you are holding a security for a couple of years on the belief that the asset will generate returns in double digits then hedge your holding by selling it in the futures market. You can always square up your bets in the futures and options market if you are out of money.
Do not over diversify– Depending on your investible surplus you can decide how many stocks you would like to have in your portfolio. By owning too many stocks you are only spreading your resources too thin and increasing the probability of neutralising the gains from good bets. Stick to companies you are familiar with and which have a good growth record. Keep adding to your holdings in such stocks every time you get them at 5-10 per cent below their near term lows.
Monitor your assets regularly- There are assets which lend stability to your portfolio in difficult times. Make it a habit to deploy at least 25 per cent of your profits into fixed income securities and treasury bills. Remember to switch over to equities as soon as market sentiment improves.
If you are looking at capital appreciation and in quick time then there is no way you can do it without maximising risks of failure and also by ignoring equity. You will be better off to remember that even the professional hedge fund managers, who are known for their aggressive investment styles, have by and large put up a miserable show in the recent past.