Golden rules of investing in stock markets.
1. DON'T BUY ON TIPS
A retail investor is typically the last one to know of the tip. Hence he is most likely to invest when the stock has already run up and hence at a risk to lose money.
3. DON'T CONFUSE INVESTING & TRADING
Trading is short term and investing is long term. Getting confused between the two can be a sure way to lose money.
4. DON'T PANIC AT SHORT TERM TROUBLE WHEN YOUR GOALS ARE LONG TERM
Volatility is the basic characteristic of a stock in short term hence quoational capital erosion should be considered normal.
5. IF YOU NEED CASH IN SHORT TERM, DON'T INVEST IN STOCKS
In stock markets one can benefit only if one can hold on for a reasonably long period.
6. DON'T HAVE EXCESSIVE EXPECTATION ABOUT RETURNS
If a fixed deposit give you 10% per annum. equity investments should typically give a return of 18-20% per annum. While you can ocassionaly find a multibagger, it is unreasonable to expect evry scrip turn out into a multi bagger.
7. DON'T TRY TO TIME THE MARKET
Buying at the bottom and selling at the top is next to impossible. take 'Buy' and 'Sell' calls based on your views on valuations.
8. DON'T INVEST WITHOUT A PLAN
A well thought out plan and discipline in implementing it can safe guard your portfolio from impulsive mistakes.