1. Don’t follow the crowd
Remember the times you paid certain tuition fees for classes in high school and college simply because your seniors had advised you to and all of your pals were enrolled in them. When it comes to stock investment, this approach can go horribly wrong. Never purchase a stock simply because many “influencers” are doing so. Try to be fearful while others are greedy, and only be greedy when others are fearful, as Warren Buffett advised. As a result, it’s crucial to do your own research. Before deciding to buy in stocks, it is essential to conduct scuttlebutt, fundamental analysis, and technical analysis.
2. Take informed decision
Make sure you understand your reasoning before making any decisions, whether you’re going to invest, sell, or hold. Make informed decisions by conducting appropriate research. You must base your financial choices on data, not emotion or reputation. Make sure you can keep a record of all your choices, either in a diary or an Excel file that can be stored. You could become a better investor by returning to these notes as you progress through your investment career.
3. Invest only in business that you understand
Keep in mind that you are investing in the company behind the stock, not the actual stock itself. When making an investment decision, it’s important to understand how a firm generates revenue, what its strengths are, and what risks it faces. If you don’t, you should pass up the chance. Prior to Google’s IPO, Buffett had the chance to invest in the company, but he declined. He had a valid excuse: he didn’t know how the search engine would generate revenue. Did he lose out on potential revenues as a result of the choice? Yes! But keep in mind that over the years, this tactic has also prevented him from suffering a far bigger loss. This principle is relevant to all of your investment choices.- for example, if you don’t understand how bitcoins work, stay away from them.
4. Don’t try to time the market
You ought to be aware of a stock’s appropriate valuation and price range. However, you must never attempt to predict when the market will rightly value it. Nobody can do that since it is impossible to foresee when a share will reach its absolute low or high. No one has been able to accomplish this over a number of market cycles.
5. Be disciplined
Once you’ve created an investment plan and determined which businesses are worthwhile, adhere to it. Stick to your goal price and stop-loss once you’ve made your decision. Once you’ve chosen your investment amount and rate, stick to your strategy strictly. When your money is on the line, market volatility will send your heart pounding and make it tough for you to keep to your strategy in the heat of the moment. However, trust the decisions you had made with a clear head. As the expression goes, if you can’t handle the heat, leave the kitchen.
6. Tame your emotions
“You can’t control your money if you can’t control your emotions,” the saying goes. You would hear tales of really wealthy investors as well as tales of the bear destroying someone else. Your heart will start to race, and you’ll start to worry about your own assets. You will feel an adrenaline rush while viewing the stock market in real time. When emotionally upset, avoid making any decisions. Let the emotions subside before making a decision based on the information you have.
7. Diversify your portfolio
Diversification is one of the most crucial techniques to keep overall risk in check. Both in terms of assets and instruments, diversify. Don’t put all your eggs in one basket, as the saying goes.
8. Be objective
Even though you can always hope for the best, all of your choices must be founded on an impartial assessment of the investing prospects that have been made available to you. All of your strategies should be founded on reasonable returns expectations rather than the best-case scenario.
9. Invest only the surplus
Keep in mind that the markets have the power to devour every rupee you invest in them. Therefore, only invest money that you can afford to lose. Before committing to something with a high degree of risk, make sure you have enough low-risk investments.
10. Track your investments
Now more than ever, financial market disruptions spread quickly over the world. Keep an eye on the markets and constantly evaluate how they affect your portfolio. It’s possible that what was once seen as “safe” is no longer safe, and you may need to rebalance your portfolio.
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