The stock market redemption:

"I am moving out of the stock market. All I have earned are losses." Exasperated, Rohit seemed done with the market. But he definitely isn’t the only one who thinks so. The market is this supposedly magical monster that either gobbles up all your wealth or doubles it. With this mindset, come the people who make the most losses in the stock market. What Rohit had done was to invest all his money on a 'tip' from a renowned financial website. The company had suffered heavy losses in forex and was currently trading at half the price that Rohit had bought it for.

A typical story of an uninformed investor. However, the market is not a monster or a beast at all. If invested in rationally and systematically, the market can bring about unbelievable riches. The best way to work about the market is as below:

The market is not magic. It works on logic. It works in response to stimuli. Understand how the market works, read as many books as possible. Sites like investopedia provide valuable information about stocks and the markets in which they are traded.

Most of the 'players' in the stock market rely on stock tips which many a times are based on rumors. Before picking up a stock understand what kind of business it does. Is it unique? Does it have a scope for growth in the future? Many businesses start of exceptionally well and fizzle out just as well. Pick businesses that have a potential of growing at a steady pace over many years. Avoid rocket stock-stocks which rise dizzily in the first few years and the just die out unexpectedly.

In the award winning movie, “the Shawshank Redemption” Andy waits for twenty years, digging through the walls, waiting to make his exit. But most of those who play the markets are always in a hurry. If the market moves up a bit, they sell, if it goes down a bit, they again sell. And the result is always the same, either a minor profit or a huge loss. If you have taken precautions buying the stock, have done your research, minor market fluctuations need not worry you. Hold on, there are better things in store.

Even the best picked stocks need to be exited sometimes. What is the use of having investments, if the money is only on paper and not useful? But again, if a stock has not been performing for a stipulated amount of time, it again makes sense to make an exit, bear the losses and make a new start.

Try out your strategies on sites which let you plan and play with virtual money. Play around and once you get the hang of it, jump in, at the right time. The stock market will work magic if played wisely and leave you a pauper if you falter. Play well, play safe, prosper!