Maximizing Returns Through Smart Investing with Demat Accounts

If you want to be a smart investor and maximize your returns, then you need to make investments through your demat account in a well-thought-out manner. But, what is a well-thought-out manner? You may even ask if there is a shortcut to make money in the stock market.

Well, there is no such shortcut. To maximise returns using your demat account, you need to follow a disciplined approach towards investment. This blog will explain the key features of such an approach.

Maximise stock market returns using your demat account

You need to follow these steps if you want to be a successful investor in the long run:

● Invest for the long-term: It is a well-known fact that stock market investments can give you a much higher return than inflation over a long period of time. But, to invest for the long term, you need to identify the right stocks and open a demat account. Therefore, you should do research and identify companies, which have the potential to grow over the next 10, 20, or 30 years. Once you make such an investment, you should keep track of the company’s progress. However, you should not obsess over day-to-day movements in the stock’s price. If you buy and sell a stock frequently, then you will be paying a sizeable portion of your gains as brokerage fees. Therefore, once you have identified a stock correctly, you should invest in it and hold on to it for the long term.

● Invest through systematic investment plans (SIPs): In the previous point, we spoke about investing in a stock for the long term. But, what if you do not want to identify stocks on your own? In such a case, you can invest in mutual funds (MFs) through an SIP. In an MF, a professional fund manager will manage your investments on your behalf. He will decide which stocks to invest in and which ones to sell. Besides, once you invest in an SIP, you will be investing a fixed amount in an MF scheme usually once a month. By doing this, you will be averaging out your cost of investments, which will provide you with a good return over the long term. That said, when you invest in an MF, you should keep track of its performance to ensure that its fund manager is making investments based on the objective of the fund. You should also ensure that the fund is giving you a higher return than its benchmark.

● Stay away from get-rich-quick ideas or schemes: When you start investing in the stock market, it is highly likely that you will get a call from a person, a financial planner, or a stock advisor who may offer you a get-rich-quick scheme or an idea. Typically, such people only think about their profit, and they do not care about the investors. Therefore, you should avoid such schemes totally. And, remember that if there indeed was a genuine get-rich-quick scheme, then all investors must be running behind it.

● Build a diversified portfolio: Diversification is the key if you want to maximize returns on your portfolio in the long run. To understand diversification, suppose that you invest all your money in one stock. Now, if this stock’s price increases, you will gain. However, if its price decreases, you will lose money. Your fortunes are tied to just one stock, and therefore, you have taken a lot of risk. To avoid it, you should invest in quite a few stocks. Even if one of your stocks takes a hit, chances are that other stocks will witness a price increase. In this manner, diversification helps reduce your portfolio risk.

● Keep an eye on notifications and alerts: You should learn how to use the notifications and alerts of your demat accounts. Through such features, you can get alerts for news updates and other important information, which can help you make a trading decision. You can even set a price alert using your demat account. In this case, if the price goes beyond a certain range, then your demat account will send you an alert. Based on that, you can decide whether to trade or not. Such alerts and notifications can help you make quick decisions and maximize your returns.

Conclusion

There is no denying that a demat account can help you make investments. In fact, there are brokers, which allow you to open a free demat account & trading account. Before opening a demat account, you should examine what features you need in it. You should also analyse several costs associated with it and then only make a decision.