If you are planning to start investing in the stock market and are worried about the possibility of a loss, then you probably shouldn’t invest. However, if you have really decided to go ahead with it, then there are certain things that you should know to increase your chances of success.
Why is it so difficult to predict market direction?
Let us take the example of NSE Nifty. It has been rising for the last couple of years. Many investors will think that a correction might come and the index as well as the stock prices will correct. But, what they don’t understand is what could trigger the correction and exactly when it will occur. As a result of this confusion, some investors will book profits and hold cash, and wait for the opportune time to get in. Some investors are willing to take more risk and continue investing because the return that he/she will earn from cash will be less compared with equities and it is also painful to earn nothing while watching the stocks move higher. So, if you are sitting on the sidelines, holding cash, how will you know when to get in? Or if you are already in the markets, how will you know when is the right time to get out?
Is it really important to understand market direction before you make investments?
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