Stock market has become a very popular mode of investment amount the young working population. The desire of make money quickly is what drives the market. From my experience of over 10 years on investing in the stock market, I can summarise the chances of success to be dependent on the following 4 factors(or pillars).
1) Knowledge
Knowledge of where and when to invest is perceived to be the most important factor to gain success. Nowadays, there are professional courses available which educates you on stock picking through technical / fundamental analysis. Most of us do not have the time to get this knowledge ourselves and hence outsource it to our financial advisors. Either ways, without the knowledge of what to buy and when to buy, one cannot be successful in stock investments.
2) Technique
The next important factor is your technique of investment. The general technique of stock market investment is to buy a stock, then hold it till the price rises, and then sell it to make profit. In addition to this plain vanilla technique, there are a host of other techniques that helps in amplifying return. It involves distributing your portfolio to make use of short term, medium term as well as intraday opportunities. It may also involve using derivative instrument to hedge your position and use other leveraged products to enhance returns. Again most of us outsource this to our financial advisors. Technique is as crucial as the knowledge itself as it helps take maximum advantage of your knowledge and also has the ability to protect you in case your stock pickings go wrong.
3) Discipline
If you ask any person who has lost money in the stock market the reason for this failure, chances are most of them would point to their lack of discipline. Stock markets has the potential to give super-high returns. This breeds greed specially among young investors. Once they start seeing the returns, they tend to make irrational decisions in an attempt to earn even higher returns. This in most cases, results in losses. All successful investors always have rational return expectations and only invest accordingly. Any higher return is considered a pleasant surprise. All your knowledge and technique would be wasted if you are not disciplined in your approach, thus this is as important a factor as any other.
4) Luck
No matter how hard you try, luck always plays a part in you being successful in stock market investing. The more you follow the other 3 factors, the less is your dependency on luck, but you cannot completely eradicate it. On the other hand, if you are weak with regards to the other 3 factors, you become almost completely dependent on luck to save you.
Hope this article was useful to you.