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Basics of Stock Markets - 3

How much Amount to Invest?
There is no fixed rule as such which says the minimum amount to invest. Ideally if you are able to start with 100K also it would be good but there are small investors who cannot afford that. If you have even 25K or 10K you can start investing but remember that the returns will not be significant.

If you invest 100K and if you make 20% profit then you get 20,000 Rs where as for 10K investment the return is only 2000 Rs. However you can start with 25K and then slowly increase the amount.

How much money can we make?

At present stock markets are giving great returns. Some stocks have returned even 100% in one month time. However you should be happy if you get 25% returns per annum. Contentment is important and if you try to make fast bucks remember that you can loose money also quickly.

Many investors would like their investment to become 10 times in one year. Remember that this kind of returns are rarely possible and so one should have contentment and should be happy with a set target of 25% or something similar to this.

When to Buy and Sell? Concept of Zero Cost Portfolio

We cannot predict the exact top and bottom for a stock. However the best method is to try making your portfolio zero cost. Apply this strategy for all stocks and then you can be risk free. However you need good amount of money for this.

Example : You buy a stock A of 100 shares at 100 Rs. If stock moves to 125 Rs, you can sell 80 shares to get back your capital. The remaining 20 shares will be zero cost for you. If you build your portfolio in this, you can enjoy good returns and it will be risk free for you.

However you should try to read the situation and then sell. You can sell the same stock at 200 Rs and make 50 shares free of cost. However see the market conditions and then sell.

You should also select stocks which have good growth story for long term and then keep making zero cost shares in those at every fall and rise.

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