Share Market Knowledge: Why do shares start falling as soon as you buy them? If you follow these 5 tips, you won’t get scammed.

Investment Tips: Most people who invest in the stock market think they have very bad luck. As soon as they buy the stock, the price starts to fall. It seems like the stock market is targeting us and out to hurt us! Do you feel the same way? If yes, then this article will open your eyes. Do you know why this happens?

Investors in the stock market must first understand how the market works. Who is running it? Who invests so much money that the stock market goes up and down millions of rupees every day? The simple answer is that people running the stock market are not retail investors like you and me. Then who are they? In fact, the stock market includes large investors (foreign institutional investors (FIIs), domestic institutional investors (DIIs), and high net worth individuals as well as retail or small investors).

The biggest difference between these two types of investors is money. A retail investor comes into the stock market with a few thousand to a few lakh rupees, while institutional investors have a money bank of lakhs and crores of rupees. This is called smart money and this smart money truly drives the market.

How does the actual game play?
Larger investors have access to inside information about companies, more research and better analysis. He has a large team for all this work, who get huge salaries. When a stock falls, big investors start putting money in there. Gradually, the price of the shares starts to increase. After that, second-tier big investors (those with a few crores of rupees) start putting in their money. Their analysis is also better.

Also Read – Share Market Knowledge: Know Just 2 Things Whether Shares Fly or Sink, There Will Always Be Profits

After both of them invest money, the stock goes up a lot. Debate starts on TV channels and newspapers. This is when the retail or small investor comes to know about this share. Due to the debate, the same segment starts attracting small investors as well. This is the time when small investors invest money. They think the stock will rocket now. As retail traders buy the shares, the price starts to rise further.

Cycle of supply and demand
A businessman on Quora gave the same details in his answer to this question. By the time a retail trader invests, the price has already risen, says Jay Hore, a financial analyst. After coming here, those (big investors) who bought the stock from the low level, start seeing good returns. From here they start booking profit. As those people withdraw their profits from the shares, the share price starts to fall.

They have so many shares that retail investors cannot absorb their supply and the price continues to fall. The law of supply and demand applies here as well. At low prices, when there is more supply (sellers), there are fewer buyers. Only large institutional investors absorb this supply. Then when the market goes up, the demand starts increasing, after absorbing the entire demand, the same big investors start supplying i.e. start selling. This series continues like this.

So what should small investors do?
If you are a small investor, there are a few things that can save you from this vicious cycle. To make money in the stock market you have to follow certain rules. These rules are as follows-

1. Don’t buy stocks out of FOMO: FOMO means fear of missing out. When there is a commotion about a stock, small investors feel that they should invest their money quickly, lest it be too late. It’s never too late in the stock market. You should put FOMO out of your mind and start investing slowly.
2. Patience is important: Once you invest, you should sit back. Should be forgotten for 2-3 years. If you are affected by the rise and fall of stocks overnight, you will not make money.
3. Invest only the money you have in the buffer: In the stock market, you should invest only the money you have in the buffer. Money you won’t need in the near future. One should never invest money by borrowing.
4. Sit for Big Profits: It is common for small investors to sell shares when they see a small profit, and sit when losses start. Small investors should be careful to stay when profits are flowing and exit at small losses.
5. Don’t fall into the trap of tips: You should not rely on tips that are available everywhere every day. If you are not familiar with the stock market, you should consult a certified investor before investing.

Tags: business news, Investment Tips, Stock market, Stock market