Wealth Guide: Tips to maximise ROI in the stock market

Wealth Guide: Whenever we talk about stock markets, people always try to find out a holy grail for investing and trading strategies which they just follow and start minting money from the markets whereas just like any other business or profession there are a lot of factors that give you an edge in the stock market returns like your mindset, goals, discipline, skillset, flexibility, and emotional intelligence. Alok Kumar, Founder and CEO, StockDaddy shares his knowledge and offer tips that may help generate maximum Return on investment (ROI) from equity trading.

A well-defined GOAL

"The first and the foremost thing that people forget while planning their investments and trading decisions is that they don’t define a goal. It is just like shooting first and then deciding the aim which is of no use, we have to aim first then shoot so define a goal for our investment or trading and then act accordingly," suggests Alok Kumar.

Money Management Skills

"Usually, traders don’t lose money because of their low accuracy ratios, most of the traders and investors lose money because they fail to understand the importance of proper money management skills. There should be clarity on aspects such as how much money you can risk per trade or investment, how to divide total portfolio in different market capitalizations, and how much money you need to have in a buffer to be ready to put it in short term correction opportunities," Alok Kumar advised.

Risk Management Skills

"A key factor in determining the ROI is your risk management skills. If you are having high exposure to risk but the rewards for those trades or investments are not in accordance with the risk that you are taking, then simply you are open to more downside than upside in your trades and investments. Similarly, you should need to define the proper “stop losses” and the “exit strategies” in your trades and investment plans. There are several techniques to manage the risk are trailing stop-loss, partial profit booking, position sizing and many more," opines Alok Kumar.

Right Mindset

"It is rightly said that “All wealth lies in the mind” so having the right mindset is very important to generate wealth in the stock market. If you have a mindset of just making money from the stock market then you will be involved only in the process of chasing money but if you have a mindset of an entrepreneur or a businessman who takes this as like not merely investing but buying and selling businesses with due diligence before undertaking any decision or then your ROI will get better over time as you will be having mindset of developing systems and consistency rather than chasing money and then money will be the by-product," Alok Kumar added.

Handling Fear and Greed (Two enemies of ROI)

"To conquer the fear and greed in the stock market, the most important things are to have a Stop-Loss and targets for all of your trades and investments. Stop-Loss helps you decide a better position size according to your risk management plans which in turn eliminates the fear factor from your trading. Your risk per trade is capped when you talk about the targets. It helps eliminate the greed factor by deciding in advance where to book your profits and exit your trade and start looking for new opportunities," he further suggested.

Lifelong learner

"Every top trader or investor happens to be a lifelong learner as they add new skills and learn from their mistakes by keeping a journal of their decisions and experiences. So, always keep on updating your knowledge and skills about the stock market because just like any other technical skills, they also need to be groomed constantly. Of course, to keep yourself ahead and have an edge in the market, you must be updated with the latest trends and practices," he concluded.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)