Simplify your stock market investments with a stock basket as a new investor
With the growing awareness about the stock markets, many retail investors are pursuing quick money. If you are trying to learn about the stock markets, you have probably come across financial influencers who showcase ‘success stories’ in the stock market. It is the internet age, and they are likely trying to capture your attention towards their social media page, persuade you to purchase their course or get you to invest your money with them. There is nothing wrong if you are a licensed financial advisor. It’s just how social media works.
But you must know that if the stock market can yield you a bumper profit in a day, it also has the potential to result in a bumper loss the next day. Driven by greed, many new investors end up losing their hard-earned money.
If you are new to the stock market and fascinate you like no other field, you can start by learning the basics. Eventually, you can develop a strategy and begin trading with smaller amounts. Once you gain confidence, you can start taking much bigger positions.
However, if you don’t want to miss out on earning in the market but don’t have enough time to learn about stock market dynamics from scratch, you can consider investing in stock baskets.
In this blog, we will discuss what a stock basket is and why it is an ideal investment choice that a new trader can turn towards when starting their journey in the stock market.
What is a stock basket?
A stock basket is made up of several individual stocks traded together, allowing you an exposure to multiple stocks in a single investment. That approach offers both diversification and convenience to investors.
But then you would ask how this differs from a mutual fund. Here are two reasons why a mutual fund is different from a stock basket:
First of all, stock basket investing involves stocks that are stored in an investor’s demat account. It allows for planned withdrawals and easy tracking of funds. Any dividends received go directly to the bank account.
Mutual funds are not stored in a demat account. They often lack portfolio customisation. As an investor, you have to choose between equity, debt, or thematic funds.
Secondly, stock baskets focus on specific strategies or themes, making them ideal for risk-tolerant investors looking for high dividends or growth in a particular area. It carries higher risks due to limited diversification when following a particular theme.
On the other hand, mutual funds offer diversification even for smaller investments, acting as a buffer against market volatility.
Now that we have established that stock baskets are clear winners compared to mutual funds let us understand why one should invest in a stock basket.
As a new investor, having an in-depth knowledge of the market is not something you can expect to learn in a day. So, instead of choosing individual stocks, you can invest in a pre-designed basket that aligns with your investment goals and interests.
Stock baskets are tailored to specific themes and trends, such as technology, healthcare, or sustainable energy. You can use stock baskets to gain exposure to industries you believe have strong growth potential or align with your interests.
Market researchers adept in their fields have already done in-depth research to build the stock basket for you. Many stock baskets are managed by financial professionals who select and monitor the included stocks. That can provide you with peace of mind, knowing that experts oversee your investments.
Investing in individual stocks can be riskier due to potential price fluctuations. Stock baskets are designed to minimise this risk by spreading your investments across multiple stocks, providing risk mitigation for risk-averse investors like you.
Investing in a stock basket is cost-effective as it allows you to access a diversified portfolio without incurring the expenses of buying multiple individual stocks or investing in a mutual fund with a 1% expense ratio.
In conclusion, stock baskets offer an excellent entry point for new investors navigating the stock markets. Stock baskets provide diversification, professional management, and exposure to specific themes while simplifying investment.
As a new investor, you can harness the benefits of stock baskets to spread risk, access different industries, and achieve your financial goals. Conduct thorough research, stay informed, and align your investments with your unique financial objectives and risk tolerance.
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