Statistics shows that in India, more than 90% Retail Investors lose money in Share Market. Still we don’t learn from our mistakes & repeat it & lose our hard earned money.
Here we will discuss most important tips to follow in simple manner so every reader will understand & can follow, so at least not lose money in Share Market.
Warren Buffet : 2 Rules for Investors in Share Market:
Rule No. 1 : Never lose Money in Share Market
Rule No. 2 : Always follow Rule No. 1
- Define your objective before entering into a share market:
We need to define our goal before entering into the share market & strictly adhere to it. Goal based investing brings discipline & also define the type of instrument/shares you will chose.
For example if you have a goal in near future say in 5 years, large caps can be suitable or debt funds for risk averse investors. Long term goals say 15-20 years, can have mid cap shares which has potential to grow in future.
2. Do proper research of the company & industry before investing:
Most of the persons gets influenced by their friends, relatives or social media hype whereas its important to study the Industry like currently we see upsurge in steel sector because of high demand & then comes leading or good shares of that sector like in Steel, we see TATA Steel is leading name & so their share price will rise more than his peers though other shares will also rise with the trend but volatility will be higher for such stocks.
3. Never Try to time the market:
One of my friend whom I met last month was disturbed as he missed the bus in one share which has risen more than 50% since then.
You may have experienced that when you buy stock, it starts declining whereas those we sell, starts rising & so you gets disturbed again.
Charlie Munger who is an associate of Warren Buffet, once quoted that Tell me the place where I will die & I will never go there.
What we mean here is that nobody, not even the Pundits of Share market can predict the market or any share movement though we can study trends, do number analysis of the company.
So moral of the story is that though we cannot time the market, we can only check the current trends, some financial ratios like P/E ratio, Balance sheet, P&L account etc. basis which we can decide the time frame & quantity to buy .
4. Keep your Emotions under control:
Your EQ plays an important role which decides whether you will make or lose money here. Unless you a trader, you shouldn’t see your invested stocks every day or few even see every hour too.
As like you don’t check your real estate price every day so same way, we should give time to our investments to grow so at least once or twice, you can check your company/sector performance & reblance your portfolio accordingly.
5. Don’t put all eggs in one basket:
We read this since our childhood days which is more appropriate to follow while investing. Diversify your portfolio so risk gets minimized, there are chances that even No. 1 company gets burst like we have examples of Nokia, Kodak etc. Not only shares but sector should also have some diversification like in Banking/financial services, Metals, IT etc.
Conclusion:
In Nutshell, what we understand here is to have a defined objective of investing then need to give required time frame. Have a diversified portfolio which need to review regularly & check your emotions while be aware of the trends happening in the market.
In case you find it difficult to give requisite time for this, suggest to have professional advice who in turn will handle your portfolio & update you from time to time.
Disclaimer: Content mentioned is my personal opinion based of our experience of the Industry & advice you to do proper research oe take professional advice before investing.