Investing Rules: Think Twice Before Investing in Share Market

“If you want to earn quick money then share market is the best place!” Have you ever come across such advice? The lure of big money has attracted you towards stock market. Hoping big returns on your investment is actually the need of an hour, but you can’t earn big in stock market before you follow some rules and guidelines.

1. Study the company

There are number of companies to buy shares of in stock market. Study the company well before buying its shares.  Go hrough the balance sheets and profit and loss account statements, understand the business of the company. Check whether the company has booked profits consistently. Invest only if you are satisfied by the performance of the company.

2. Avoid herd mentality

Don’t invest in the stocks just because people around you are investing. Your friends, neighbours may be investing in some specific stock but you check the credentials of the company before putting your money in. The great investor Warren Buffett says “be fearful when others are greedy and be greedy when others are fearful.”  

3. Don’t follow tips

You should always be cautious when people give “tips” to buy or sell a stock. These, invariably, mislead you. So, there are heavy chances of losing money when you follow such tips.

4. Don’t keep all your eggs in one basket

It’s a famous saying which very well applies to stock market. Don’t invest all your money in a single stock. Spread your money in more than one companies, even if you lose money in one stock you can gain in others.

5. Be patient

To earn good profit you should be patient. Be in the market for longer time. Allow your investments to grow. Quick money now comes with huge losses in future. So be careful and be patient.

6. Have realistic goals

Invest in the market hoping achievable goals. Stock market is not a tree of money that will grow up to rain more and more money for you. Always enter in the market with goal which is realistic. You can’t expect your money to grow up by 50% or 60%. Warren Buffett says that earning 12% in stock market is pure dumb luck.

7. Be there for longer time

Keep invested in market for long term. You should stay invested for at least three to five years. Give your investments a time to grow.

8. Don’t time the market

This is one thing which nobody could do with a perfection. When you want to be in the market for long time, there is no perfect entry time or perfect exit time. Market always try to achieve new levels, so you cannot expect market to come down for your entry. This level can be the lower level (and the entry point for you) for the next level.

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9. Follow the discipline

It is very important to be disciplined while investing in stock market. It is advisable to invest systematically/periodically to earn great returns. Investing systematically at regular intervals will not allow you to lose money either in bull or bear market.

10. Stop Loss

Always keep the stop loss and book losses when you trigger stop loss.

Remember, now we stay in a global village. An event in any part of the world can make or break the financial markets. Never allow your emotions to overpower you, it may be greed of earning more in bull market or fear of losing in bear market. Never allow your broker to trade behalf of you. Always buy/sell for yourself.

There is no sure formula for being success in share market. Owing a part of a company is always exciting. You can really owe a part of a company, provided you keep these things in mind.

– Sucheta Acharya