You can never be too sure when you invest in stock market. You always need to revisit what you know and keep learning something new each time. However, there are some guidelines that you can follow, some dos and don’ts. Let’s look at them.
1) Don’t depend heavily on tips
When it comes to the stock market, there are thousands of “valuable tips” out there that claim to make you rich before you even utter the words “rich”. Many of these tips don’t have an investment value because they are not backed by any solid analysis. They can come to you from TV forecasts, news flows or your friends and families. However, you need to follow the old saying of listening to all suggestions but deciding for yourself.
2) Don’t try to time the market
Predictions don’t work well with stock market, patience does. Thus, it is recommended that you do not try to predict the accurate time to start investing in stocks. Instead, start investing as early as possible. By doing so, you could truly explore the potential of interest compounding. Also, if you are investing via a systematic investment plan (SIP), you could explore the potential of rupee cost averaging.
3) Do your homework
Numerous factors influence a stock and as an investor, you should be aware of them. Some information might not be readily available to you. You might have to scour market reports and the financials of a company to understand the implications of such factors. Thus, you need to do your homework thoroughly if you want to increase your wealth in the long-term.
4) Don’t take emotional decisions
Imagine you invested a lot of money in a stock. You did your research and you are confident about its exceptional performance. However, a sudden turn of economic or political events results in inferior performance. All signs indicate that the stock is going to deteriorate further. What do you do in such situations? Do you cling on to the stock because you did your research and you are confident about your research or would you cut your losses and exit? For the sake of your returns, you might need to decide against your initial research. You will have to take the tough decision to devise an exit strategy.
5) Don’t panic
“The stock market is a device for transferring money from the impatient to the patient,” says Warren Buffett, the modern-day guru of investing. The stock market is volatile. On occasions, you might feel that the roller-coaster ride is too much to handle. On such occasions, it is important to not panic. It is important to keep your focus on the goals and repeat to yourself that the markets will bounce back. It’s just a matter of being patient. Don’t simply sell your investments because everyone else is selling. That’s the fastest way to lose all your hard-earned earnings.
It is important to be patient and steadily build your investments. Study the market closely, read books on investments, understand how the experts invest and do your research before investing. Try not to become an overnight success in stock market. Have a long-term plan and invest accordingly to reap the benefits.