InvestorQ : How do I set goals in trading stocks?
shrinidhi Rajan made post

How do I set goals in trading stocks?

nishi Shah answered.
3 years ago

This, in a way, sums up the crux of trading and investing. When I had asked a retired officer, why he wanted to trade in the market, his off-the cuff response was, “I have a lot of spare time”. This kind of a goal can be disastrous. You need to clearly define what you plan to achieve in the market. If you do not define your goal, you are unlikely to have a target to work towards.

Defining your goal helps crystallize quite a few things. Firstly, it allows you to decide how much risk you need to take. Secondly, it also defines whether you need to keep liquidity easily accessible or not. Thirdly, it directs your strategy better. For example, if your aim is to create a blue chip portfolio, don’t waste your time trying to make money on penny stocks. Rather focus on your goal!

Setting a goal becomes critical because it defines the quantum of risk you are willing to take and also the quantum of risk that your risk appetite permits you to assume. For example, if you are looking at just getting better returns than an FD, you need not take undue risk in the market. Just focusing on blue chip stocks and buying them on corrections should be sufficient to beat the returns on an FD. But first define your goals.