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7 Golden Rules of Investing

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7 Golden Rules of Investing

The lure of a big money always attracts the investor to the door of a stock market. Invest in a stock market isn’t that much easy neither an impossible. It not only requires plenty of research and sound knowledge but also patience and discipline. Investment isn’t a science but there are certain rules which may help investors to attain their goals. Stock market volatility is increased in the last few years. It’s making investors confused to take the right decision. They are confused about whether they should buy, hold or sell and book the profit.

The stock market is definitely not for you if you are looking for “Get rich quick“ scheme. There is no sure shot formula that could give you the overnight success in the stock market. However, there are the bunch of rules may help you to become a successful investor. So here we have brought the 7 rules to boom your chances of success in the stock market and getting a good return.

1) Plan A trade

There is a well-known quote in a stock market, “plan a trade, trade a plan”. That’s mean you must have a sound knowledge of your action. You should know, why should you buy? What should you buy, and when should you buy? Do your own research. Don’t comply with the herd mentality. Most of the people who lose money in the stock market are the same who follow the crowd. Those people decision purely based on news, friends/colleagues advice or so-called stock advisory tips. In case, you want to be in a safe side, do fundamental analysis, track past performance, and make a plan for trade.

2) Invest in a business you understand

Never invest in a stock. Invest in a business instead. And the most essential is invest in a business you understand. Before investing in any business understand the business first.  Make sure you have sound knowledge about company management, product, past performance, and future prospectus.

3) Invest regularly

As I have already mentioned, “investment isn’t a get rich quick scheme. In case, you want to achieve the real advantages of an investment, plan for a long-term and make an investment often. You could invest a fixed amount regularly in the stock market. In case, you are someone who can spend time and do your own research, a stock market is the best option for you. Otherwise, you may put money into a mutual fund and start a SIP. However, compare the best SIP plans first.

4) Create a diversified portfolio

Don’t put all the eggs in a single basket”. You would have heard this quote earlier. What does it mean is diversify your portfolio? Even if your stock is performing well and having a good track record. Even you’ve already done your research on it, still do not invest your hard earn money in a single stock. To balance your investment the smart move is to pick out four to five blue-chip companies from different sectors like infrastructure, energy, finance etc. and make a portfolio.

5) Do not allow emotions to cloud your judgment

In a stock market, 95% people lose their money. Because these peoples decision simply based on emotions. Always remember for investing take a decision on the basis of data and analysis, not a price movement. Because sometimes even fundamentally strong stocks price moves in opposition to your expectation because of negative news, global action and so on. However, the most important investor Warren Buffet said, “Always do exactly opposed to the people. When everyone is buying sell your stock so you could get the best price of your stock and when everyone is selling buy that stock so you will get that stock at the bottom price.

6) Invest for the long-term

If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes”. This Warren Buffets quote gives you gravity about the importance of holding a stock for long-term. While we speak about the long-term investment that means the time period of a minimum five to seven years. Long-term investment has historically proven to generate more wealth than short-term investment. Additionally, there are several benefits tax advantage, low volatility, dividend and many more that makes longtime investment stand out from short-term investment returns.

7) Focus on value, not price

As an investor, you should usually concern about the stock value, not a price. Because sometimes stock prices change temporarily due to the events or corporate announcements. After the certain period, that comes back to its real value. So invest in a value stock and have patience. Also, it is important for investors to re-evaluate their stock’s value on a regular basis. Taking this step makes it unlikely that you will hold a failing stock or sell one with strong prospects.

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