Satock market volatility in the last few years has left investors in a state of confusion. However, making money in equities is not easy but good research and a sound understanding of the market will may increase your chances of getting a good return in the stock market.
Although no sure-shot formula has yet been discovered for success in stock markets, here are some golden rules which can be followed sinceriously.
- Fear and greed play very important role in the stock market : In the stock market basic human emotion is perhaps the greatest enemy in the way of successful investing. So, 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!“
- Have disciplined approach & strategy : whether you’re a long-term investor or a day trader you must have your own disciplined approach & strategy of trading or investing. You must have a trading plan with every trade. On the upside and down you must know exactly at what level you can squar off of your stock.
- Avoid the herd mentality : Neighbours, relatives, friends & TV play very important role in our life thus, if everybody around is investing in a particular stock, the tendency as a normal investors is to do the same. But this strategy is bound to backfire in the long run. if you don’t want to lose your hard-earned money in stock markets then you should always avoid having the herd mentality.
- Proper research before investing in stocks : Proper research always be grate thing before investing in stocks. But that is rarely done. Humans have a natural tendency to follow the crowd, but when it comes to stock market investing, following the crowd can often result in losses. So proper research is important before picking any stock for long run or for day trading. You can join any research desk for few days or few week so that you can understand the basics of stock research.
- Extreme optimism or pessimism not good for stock investment : If you want a handsome return then please avoid extreme optimism or pessimism it can hurt you very deep & you can avoid the stock market. For individual investors, the lesson is clear —”make a plan and stick to it.” Don’t get thrown by the daily chatter and turmoil of the marketplace.
As the voice of Howard Marks……
“The investment world is not an orderly and logical place where the future can be predicted and specific actions always produce specific results. The truth is, much in investing is ruled by luck. Some may prefer to call it chance or randomness, and those words do sound more sophisticated than luck. But it comes down to the same thing: a great deal of the success of everything we do as investors will be heavily influenced by the roll of the dice.”
That’s why it’s so important to appreciate the role of luck instead of ignoring it & creating a sound investment philosophy is one of the most critical steps to take as an investor, because when you start with a map in hand, the journey becomes less troublesome.
