What are the things to keep in mind before taking a call to invest in equity?

Given the recent market events, You might be wondering if this is the time to reconsider your portfolio allocation. With stock markets being extremely volatile these days, many investors might be afraid to invest in equity. Below are some crucial steps before taking a call in equity.?

1. Set your goals first. Never jump blindly into stock markets?

While talking to your friends and colleagues, the discussion heads towards the stock market and how the stock market helps investors make big money. You might never have invested in the market, but you decide to buy some stocks after hearing about all those things. This isn't the right way to invest in the stock market. Every investor has unique needs.?

2. Educate yourself; handle basics first?

Before making your first investment, You need to learn the market basics. The different types through which you can invest are also essential. There is an adage: It is not a stock market but a market of stocks. Your focus should be on the individual securities you are investing in, the relationship with the broader economy, and the factors that drive your stock. Some essential elements which you should be familiar with before entering the market are:?

Gain some understanding of the market and its correlation with the economy, such as market relationship with inflation, GDP, fiscal deficit, crude prices, and rupees values against the dollar. People lose money because they simply jump into the market without understanding the economic and investment market cycles.?

3. Don’t try to time the market; follow a disciplined investment approach?

Never try to time the market. No one can consistently time the market by catching the tops and bottoms over multiple cycles. You can invest a small amount from time to time over a long period to average the market and thus avail its benefits. Investors who systematically put money into good quality companies over a long period generate outstanding returns. Hence, it is wise to have patience and follow a disciplined investment approach besides keeping a long-term picture.?

4. Don’t let emotions impact your investment?

Separate your emotion from any particular stock; Many investors lose money in the stock markets due to their inability to control emotions. Do not invest in any unknown speculative stock without understanding its risk. In a bear market, own your fear and don’t panic and exit from your equity. Get rid of the fear and greed cycle.?

5. Have realistic expectations?

Hoping for the ‘best’ from your investments is not wrong, but you could be heading for trouble if you have unrealistic expectations from your portfolio. For instance, many stocks have generated more than 100 per cent returns during the great bull run of the previous year. However, it isn't sensible to always expect the same return from the stock markets. If you feel that stocks in your portfolio are overvalued, switching to a relatively low-value good store is better.?

Lastly, it’s essential to monitor your investment and review it periodically, as any critical event impacts our financial markets in any part of the world.?