How to Invest in the Stock Market to Achieve Your Financial Goals

There are two ways by which an individual can achieve their financial goals the first is by saving their money and the other is by investing their money so under investments you have uh several different investment options uh some of the more familiar ones are investing in gold uh in real estate and also foreign currency the stock market is another option for

Investors to look at to add to their portfolio of investments one thing that needs to be noted is that stock market does have the two aspects they have the returns and also the risks but it should be noted that as long as an individual has a good understanding of the stock market and makes well-informed decisions they are able to reduce their risks of investing

In the market another difference from the stock market to some of the other investment options is that investing the stock market is much more organized and also is governed by a legal framework coming back to the question of what is a stock market a stock market is a place where you can buy and sell shares and debentures collectively known as securities

Of publicly listed companies a publicly listed company is a company whose shares have been listed on the stock exchange through an initial public offering the colombo stock exchange operates as the only share market in the economy and it is responsible for providing a transparent and regulated environment for both the institutional and individual investors

Operating in the capital market so in order to trade on the columbus stock exchange it is a must for an individual to have a cds account for this there are a few requirements that need to be met the first one is the individual needs to be at least at a minimum of 18 years or above they need to possess a national identity card they need to have billing proof

Of address and then they must also have a bank account and also an email address there are two ways in which someone can open a cds account the first one is by visiting a registered participant of cds we have 28 licensed stock brokers who can help you with opening a cds account the list of these 28 stock brokers are available on the colombo stock exchange

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Website and the other option which is the more convenient option is to open a cds account through the newly launched csc mobile app so there are 28 licensed stock brokers in sri lanka in general the service they provide are quite similar in nature it is possible for you to find out the names of the 28 stock brokers in the columbus stock exchange website as

You know in a dynamic market that we are right now reliable information is very important therefore it comes down to the preference of the investor when it comes to choosing a stock broker who’s had a very strong track record of making the right calls in stocks so there are two ways in which someone can buy a stock the first is through a primary market so

The primary market is where someone can buy shares through what we call an initial public offering this is when a company lists itself on the stock exchange and they will issue a notice to the general public inviting to inviting them to buy shares in the initial public offering so any investor at this point can fill in the relevant documents required and can

Buy the shares of these companies at an ipo in the secondary market the shares that are already owned by the investors following an initial public offering can be bought and sold through a brokering firm it is important for an individual not to just invest all of their money in one stock in other words do not put all of your eggs in one basket by investing

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In different companies an individual can spread their risks so when building an investment portfolio it is important to think about a few different factors the first one is how much you are willing to invest the second one is over what time frame you are looking to invest and the third one is what is your expected return so based on these uh an individual

Can pick the stocks for their portfolio the other way of spreading their risks is by looking at different sectors so here again you do not want to be exposed to one specific sector by looking at economic political and also other developments that are taking place in and around the country it is important for you to choose your sectors for example in the

Current pandemic you are seeing certain sectors that are benefiting quite strongly while there are also other sectors that are being impacted so in this context it’s important for an investor to make sure that they are exposed to the right sectors at the right time another option an individual investor has is to invest into diversified companies so these are

Companies that already have positions in different sectors by doing this again an individual investor can spread their risks by making informed decisions in the stock market an investor can make strong returns greater than most of the other investment options there are few types of returns that an investor can benefit from in the stock market the two main

Ones are the first one is capital gains so here for example if you bought a share at 10 rupees and you saw the price appreciate to 12 at which point you sell you are making a 20 return on your investment the other uh type of return that you get is when you buy a particular share of a company you are entitled to the profits of that company through dividends

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So dividend returns are also something that you can expect to gain from companies when when they have a strong performance right now given the context of a low interest rate environment investing in the stock market will give an individual investor much higher returns than most of the other investment options around we usually use a price index to measure the

Sentiment of the market we have two indices in sri lanka namely the all share price index also known as the aspi and the snp sl 20 index the movement of both of these indices depend on collectively the performance of the companies that are listed under these indices so when collectively the stocks are doing well the indices will move up and when they come down

You will see the indices move down so this will give the investors a sense of direction as to where the market is heading we generally recommend investors to get into the market when the stocks are coming down but it is important for investors to understand the reasons behind the stock prices coming down if there are no fundamental reasons that are affecting

The company’s stock value when the market comes down it provides a good opportunity for investors to buy in it is important for investors to understand that investing in the stock market has an element of risk market fluctuations are a common theme that you will see this depends on certain news items that can come on specific companies on the economy on the

Political front so in this context it is important for investors to make an informed decision seeking the advice of their investment advisors to place themselves in stocks that are fundamentally strong and will generate returns in the long term

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How to Invest in the Stock Market to Achieve Your Financial Goals By Colombo Stock Exchange