Stock market investments have historically provided higher average returns in comparison to various other investment options like bonds, savings accounts, or real estate over the long term. As Kavan Choksi Wealth Advisor mentions, even though past performance does not guarantee future results, equities have shown the potential to generate considerable gains. The stock market provides an expansive range of investment options across various industries, sectors, and geographical regions
Kavan Choksi Wealth Advisor provides valuable insights into making money in the stock market
One of the most common and simple way to make money in the stock market is by adopting a buy-and-hold strategy. Under this strategy, investors tend to hold stocks or other securities for a long time rather than engaging in frequent buying and selling. Doing so becomes important to build wealth as investors who trade in and out of the market on a daily, weekly or monthly basis consistently often miss out on opportunities for strong annual returns. They need to stay investing for the long haul in order to capture the stock market at its best.
In addition to following the buy and hold strategy, diversifying the investments is also vital to building wealth. Most seasoned investors know about how diversification is a time-tested investing practice. It is considered to be the key to lowering risk, as well as potentially boosting returns over time. The practice of diversification is simply the investing equivalent of not putting all eggs in one basket.
Most investors gravitate toward two investment types, individual stocks or stock funds like mutual funds or exchange-traded funds (ETF). Investing in the latter can especially be useful in maximizing the diversification. Investors may always opt to purchase a plethora of individual stocks with the aim of emulating diversification they automatically find in stocks. However, doing so may take a good amount of time, and this step is usually carried out by savvy investors who can afford a sizable cash commitment. After all, an individual share of a single stock may cost hundreds of dollars.
On the other hand, funds, allow investors to gain exposure to hundreds or even thousands of individual investments simply with a single share. As per Kavan Choksi Wealth Advisor, for the best possible outcomes, it would be a good idea to invest in funds that passively track major indexes, like the NSE Nifty or BSE Sensex. Doing so shall position the investors to benefit from the around 10% average annual returns of the stock market as easily and affordably as possible.
For investors interested in making money in the stock market, reinvesting dividends can prove to be a pretty smart move. A large number of businesses pay their shareholders a dividend. The dividend amount is typically very meagre. Hence, the dividends may seem almost negligible to an investors especially when they first start investing. However, the dividends are actually responsible for a large portion of the stock market’s historic growth. Nifty 50 has had about 12% returns since inception and when dividends were reinvested, the percentage jumped to almost 16%. This is because each dividend people choose to reinvest would buy them more shares, which helps their earnings compound faster.