Every one of your endeavors requires a basic common sense approach. Particularly, investing in the stock market. Common sense helps you to think clearly and make informed and calculated risks in the stock markets – one that will pay you off in the long run. So, here are a few thoughts to keep in mind and not do when you embark on the stock market journey.
DON’T FORGET MARKETS CORRECT
When stocks tumble and fall, do not wallow in distress. Instead, look at the slip in prices as opportunities to purchase your favourite stocks (yes, you must make a list of stocks you want to buy and hold) at bargain prices. Savvy investors have made large fortunes betting on markets when they are at a low. Markets will inevitably rise again. You have to see past the gloom. It can be very profitable.
DON’T TRADE, BUT INVEST
While there are a lot many investors, chances are that you will not find the endeavor easy in the start. Active trading requires a great deal of time and dedication and commitment. You have to keep your attention on the stock market movements all the time. Any distractions could ruin your intention and desired outcome.
So, the alternative is that when you cannot follow the stock market all the time, you purchase stocks that are strong, solid growth machines that can generate profits over the long duration. That helps much more than trading in and out.
DON’T FORGET TO HOLD CASH
Legendary investor Warren Buffett keeps a buffer of cash ready for investing at all times. When investing in the markets, cash is always an option. As the ideal time to buy stocks is when they tumble, and since any news flow can impact stock prices, you should not be found wanting on the cash front when prices are low. There is nothing wrong with holding a chunk of cash. You will get it right when you scoop a bargain.
DON’T SPREAD YOUR INVESTING BASKET IN MANY STOCKS
You cannot make sizeable returns if you have too many stocks in your portfolio. You have to aim for about 20-25 stocks spread across a wide-array of growth sectors and companies. One of the things about having 20-25 stocks is that you can constantly see how much profits they are delivering as per their promises.
DON’T STICK WITH LOSERS
Re-balancing your portfolio is an art. If there’s a significant deviation in your stock’s performance, it’s always a time to check the performance of the company. If profit growth has been decisively poor, and it looks like a long-term miss, cut your losses in the stock – and move on. It’s always better to take a little loss in your portfolio, than to stick with losers. Re-invest the cash in better growth opportunities.
