The stock market has always lured investors with the promises of big money, however, generating a profit through equity investments is not easy. It requires huge amount of discipline, patience, in-depth understanding of the market, and a great deal of research among others.
Further to this is the stock market volatility always confuses the investors. They're in a constant dilemma whether to enter, hold or exit a certain stock.
Although there isn't a sure-shot formula that would guarantee success in stock markets, here we give you 5 golden rules. If you follow these stock tips prudently, the chances of your success will definitely increase:
- Maintain A Disciplined Investment Approach:
Historically, bouts of panic moments have been recorded even during great bull runs. Share Market volatility has inevitably led to numerous investors losing great deals of money even in the face of great bull runs.
Besides keeping a long-term broad picture in mind, it is advisable to have patience and follow a disciplined investment approach. Hence, if you invest your money systematically, and buy the right shares and hold on to your investments patiently they will generate outstanding returns.
- Invest Only In Businesses You Understand:
Always invest in a business instead of simply buying shares, and invest your money in a business that you understand.
- Don't Follow The Herd Mentality:
As Warren Buffett - the world's greatest investor said, "Be fearful when others are greedy, and be greedy when others are fearful!" Typically a buyer's decision is heavily influenced by the actions of her/his relatives, friends or neighbours. For eg, if everybody you know is investing in a certain stock market tip or a specific stock, chances are that you being a potential investor would do the same. It is very easy to be influenced by a friend who gives you a stock market tip and asks you to invest in it as it will give you good returns. However, this strategy generally backfires in the long run. So stick to your research and understanding.
- Never Take Uninformed Decisions:
Always ensure that you have done your due research before investing in stocks or stock tips. Amateur investors in general simply go by the company name or the industry that the company belongs to. This is a definite way of gambling with your money.
- Don't Try To Time The Stock Market:
Even Warren Buffett doesn't try to time the market, although he does recommend on having a strong view on the price levels appropriate to individual shares.
So, don't try to time the market. In fact, nobody, not even Buffet has been able to successfully and consistently do this over multiple businesses or stock market cycles. It is a myth to be able to catch the tops and bottoms. Majority of investors have and still keep losing money in trying to time the market.
Follow these 5 basic stock market tips before buying shares and reap the benefits of higher returns on your investment.