Sunday 3 July 2011

The Do's and Dont's in stock market investing

The global meltdown has been going on for sometime now. It started with the subprime crisis. Now recession looms large and with crude prices touching all time highs stock markets are bound to have a free fall. Indian stock markets seem to be falling like a pack of cards while the other global markets are not far behind. For new investors, this would be the best time to invest long term. Here are a few share tips as to how to go about in equity market .

What you must NOT do


1. Do not panic

The market is usually volatile. Take this fact as truth and avoid panic.If the prices of your shares have plummeted, there is no reason to want to get rid of them in a hurry. Stay invested if nothing fundamental about your company has changed.

2. Don't make huge investments

When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages.When the market dips --buy them. When the market dips again, you can pick up some more. Keep buying the shares periodically.Everyone knows that they should buy when the market has reached its lowest and sell the shares when the market peaks. But the fact remains, no one can time the  market.Pick a few stocks and invest in them gradually.

3. Don't chase performance 

A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically.

4. Don't ignore expenses

When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits specially if you are selling for small gains

What you MUST do

1. Get rid of the junk

Any shares you bought but no longer want to keep? If they are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilise the money elsewhere if you no longer believe in them.

2. Diversify

Don't just buy stocks in one sector. Make sure you are invested in stocks of various sectors.Also, when you look at your total equity investments, don't just look at stocks. Look at equity funds as well.

3. Believe in your investment

Trade cautiously. Invest in stocks you truly believe in. Look at the fundamentals. Analyse the company and ask yourself if you want to be part of it.


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