Mantras for Smart Investing |
| Making the right choice |
| All new investors try to find that elusive stock that will propel them to riches; this is not the right attitude. Do not try to reinvent the wheel, instead, buy stocks of companies that are consistent in performance and watch your income increase at a steady pace. |
| However tempted you may be, taking tips from your neighbour is a NO NO. More than likely they heard these stock market tips, and like Chinese whispers, when you finally hear them they are so distorted that believing them would be foolish. It is far better to do your own research, or if you are unsure, find a qualified professional. Learn from them, don't follow the masses, and remember the rule of what goes up will come down and vice versa. Watch the market, look for the changes and be ready to move. |
| Researching carefully is a must, don't just look at the P/E Ratio (price to earning ratio) of a company in the present moment, you need to research the past and the possible future growth too. When you have found a company, don't put all your money into it, find several companies, and diversify. This will protect your investments. |
| Don't over diversify either; 4-5 mutual funds are adequate. You can keep a better eye on them, also, more than that could lead to a false sense of security. You don't want your lifestyle to change for the worse, do you? |
| Watch out for illiquid securities, meaning those companies that trade little or ones that have small floats. You may find that when you sell, the value of their stocks could decrease. What we are saying is, whenever you buy stock, make sure you can sell too. |
| Selling the Right Stocks |
| Hazarding a guess, many of you have sold stocks that have gone up a few points and retained the ones that are going down. Correct? Surely it is better to sell the losers and keep the winners. So, it is better to average up rather than averaging down. Keep, and own your winners. |
| Buy and Sell smartly |
| We know that stock markets fluctuate, and when the market falls it could be really tempting to buy up everything in sight. Buying smart, does not mean buying because the stock value is low, it means buying the stock that you think it will go up. |
| This does not mean that you have to buy at a low value, look for stock splits, dividend announcements, events that could increase values. Keep your eye on the drop that could occur after a split, watch for the bottom, then buy and have fun. |
| Rumours are fact based, if you hear a rumour regarding a buyout or a new drugs trial with chances of approval, these are the type of rumours you could benefit from so buy. When it is revealed on the News, whether the topic is discussed in the positive or the negative, that is the time to sell. If you don't hear anything and there are no News announcements, pick your time to sell. |
| Investors invest, so don't over trade. When you buy a stock, you always buy for a reason, and that reason will remain the same, so if the stock is doing fine and there are no major circumstances that affect it, hold on to it. But, if you see your stock falling and falling, for goodness sake sell. It has been known for stocks to fall and never return. |
| Be careful when placing limit orders on your buying. By placing a limit order could cost you the stock that you wanted; you would be disappointed then wouldn't you? Just remember, if you want to invest in a company, just do it. This is not a game of chance. |
| Before you bought your stocks, you did your research, right? So don’t have your stops too tight. If you know that the normal trading swing varies a few points in a day, don’t make the mistake and get "stopped out" due to normal fluctuations. |
| Watch the Trends |
| When you study stocks, you will notice that they move in groups, and also they all move in the same direction at the same time. If you find that a company doesn't reflect the estimates of an analyst, remember that they are only estimates. Stock Market Analysts are not Gods, companies could earn more or less than what they believe. It is far better to watch your stocks performance when heading toward an announcement rather than focusing on the analysts believes. |
| Finally, the money making secret of the bourses is not buying low, nor selling high. It is the identification of what stocks to buy and the knowledge of knowing the right time to sell. It is buying and selling at the right time and at the right price. |
| Do's and Don'ts for Indian Stock Market | Wise rules of Investing - Financial Planning |
