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Sunday, November 16, 2014
7 GOLDEN RULES OF INVESTING STOCK MARKETS
Today we are looking into some interesting investment rules published Economic times news paper. My friends asking daily which price we can buy stocks (up circuit or down circuit?) patience means what in stock market?,just spend some time to read this I think this will helps investors for long term investment ideas. (All credits goes to original articles author and economic times news paper)
Although no sure-shot formula has yet been discovered for success in
stock markets, here are some golden rules which, if followed prudently,
may increase your chances of getting a good return:
1. Avoid the herd mentality
The typical buyer's decision is usually heavily influenced by the
actions of his acquaintances, neighbours or relatives. Thus, if
everybody around is investing in a particular stock, the tendency for
potential investors is to do the same. But this strategy is bound to
backfire in the long run.
No need to say that you should always
avoid having the herd mentality if you don't want to lose your
hard-earned money in stock markets. The world's greatest investor Warren
Buffett was surely not wrong when he said, "Be fearful when others are
greedy, and be greedy when others are fearful!"
2.Don't try to time the market
One thing that even Warren Buffett doesn't do is to try to time the
stock market, although he does have a very strong view on the price
levels appropriate to individual shares. A majority of investors,
however, do just the opposite, something that financial planners have
always been warning them to avoid, and thus lose their hard-earned money
in the process.
"So, you should never try to time the market.
In fact, nobody has ever done this successfully and consistently over
multiple business or stock market cycles. Catching the tops and bottoms
is a myth. It is so till today and will remain so in the future. In
fact, in doing so, more people have lost far more money than people who
have made money," says Anil Chopra, group CEO and director, Bajaj Capita
3.Follow a disciplined investment approach
Historically it has been
witnessed that even great bull runs have shown bouts of panic moments.
The volatility witnessed in the markets has inevitably made investors
lose money despite the great bull runs.
However, the investors
who put in money systematically, in the right shares and held on to
their investments patiently have been seen generating outstanding
returns. Hence, it is prudent to have patience and follow a disciplined
investment approach besides keeping a long-term broad picture in mind.
4.Do not let emotions cloud your judgement
Many investors have been losing money in stock markets due to their
inability to control emotions, particularly fear and greed. In a bull
market, the lure of quick wealth is difficult to resist. Greed augments
when investors hear stories of fabulous returns being made in the stock
market in a short period of time. "This leads them to speculate, buy
shares of unknown companies or create heavy positions in the futures
segment without really understanding the risks involved," says Kapur.
Instead of creating wealth, these investors thus burn their fingers
very badly the moment the sentiment in the market reverses. In a bear
market, on the other hand, investors panic and sell their shares at
rock-bottom prices. Thus, fear and greed are the worst emotions to feel
when investing, and it is better not to be guided by them.
5.Have realistic expectations
There's nothing wrong with hoping for the 'best' from your investments,
but you could be heading for trouble if your financial goals are based
on unrealistic assumptions. For instance, lots of stocks have generated
more than 50 per cent returns during the great bull run of recent years.
However, it doesn't mean that you should always expect the
same kind of return from the stock markets. Therefore, when Warren
Buffett says that earning more than 12 per cent in stock is pure dumb
luck and you laugh at it, you're surely inviting trouble for yourself.
6.Invest only your surplus funds
If you want to take risk in a volatile market like this, then see
whether you have surplus funds which you can afford to lose. It is not
necessary that you will lose money in the present scenario. You
investments can give you huge gains too in the months to come.
But no one can be hundred percent sure. That is why you will have to
take risk. No need to say that invest only if you are flush with surplus
We are living in a global village. Any important event happening in any
part of the world has an impact on our financial markets. Hence we need
to constantly monitor our portfolio and keep affecting the desired
changes in it.
If you can't review your portfolio due to time
constraint or lack of knowledge, then you should take the help of a good
financial planner or someone who is capable of doing that. "If you
can't even do that, then stock investing is not for you. Better put your
money in safe or less-risky instruments," advises Kapur.