Golden Rules Of Investing In Stock Market
Never Invest in a Single Stock
In this golden rule fear and greed factor play a very important role. To avoid any future shocks, you should hedge your risk when you never invest in a Single Stock, and try to invest less than 10% in single stock. We all know the saying ‘don’t put all your eggs in one basket’, but it’s important to apply this rule when investing. In stock market stock selection is the critical factor which decides the return of your portfolio.
Never invest in anything you don’t understand
Before you put your money into any investment, take time to research it thoroughly, so you understand exactly what’s involved and what the risks are. So, invest in a business you understand. If you’re investing in individual businesses, make sure you know what the company does and how it plans to make money in the future, and always remember never invest in a stock. Invest in a business instead. And never invest in something you do not understand.
Invest for the long-term
Investing ought to never be viewed as a ‘get rich quick’ plan. You have to remain invested for more than five years, yet ideally any longer to give your investment the most obvious opportunity with regards to giving the profits you’re planning to. Even then you must be comfortable accepting the risk that you could get less than you put in If your investment goals are short-term, for example, two or three years away, investing won’t be right for you, as you’ll need to keep your money readily accessible, usually in a savings account.
Pick Up the Right Stocks for Investment
In the Share market selection of right stock is the key to success. In share market, many bad companies are present to avoid this go through this article HOW TO REJECT BAD COMPANIES FOR INVESTMENT. In the future right stock give you higher returns. There are different types of stocks and it shows a different price movement. As an investor, you must decide which type of stock you are going to invest.
Determine the Right Time for Buying and Selling Stocks
When you have selected the stocks for investment, you must decide whether it is the right time for investing in that stock. Even if the stock is looking good and seems to have a good potential, it might incur your losses if you do not determine the optimum price level for investing in the stock. For this, you must technically analyze the price movement of the stock and determine the right price level when you should buy and sell the stock.
Liquidity refers to how easy it is to buy and sell a share. If you’re interested in stock market basics, here are some guidelines to know.
· The stock must be actively traded.
· The liquidity requirements level become distracting for most traders in that you should stick to tickers with a price
Take Informed Decision
Before investing in stock market proper research should always be undertaken. But it is rarely done. Investors normally invest by the name of a company or industry they belong to. This is not the right way of putting one’s money into the stock market.
Buy Low and Sell High
By the market sentiments and the sudden news results in stock selling never get swayed. In fact, at that time when everybody is selling you should be buying. It is the time when you should have cash. Every fall should be a buying opportunity for you. It is a tough thing to do but once you achieve it you will make huge amounts of money in the market. That way you lower your cost of holding and gain huge percentages when the market is increased. Then you can sell at the higher prices and you will have cash when the market is in a downturn as opposed to your money being locked in the shares.
Do Not Let Emotions Cloud Your Judgment
In the stock market due to fear, greed, and investors inability to control emotions many investors have lost money.
In a bull market, quick wealth is difficult to resist. When investors hear stories of fabulous returns made in the stock market in a short period of time. This leads them to take the risk without really understanding the risks involved they buy shares of unknown companies.
In a bear market, investors are afraid and sell their shares at low prices. Therefore, when investing in stock market fear and greed are the worst emotions to feel.