5 golden rules of investing in stock

5 golden rules of investing in stock

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The attractiveness of money has always thrown investors into the stock market. However, making money in stocks is not easy. Not only does it require a lot of patience and discipline, but also a lot of research and a good understanding of the market, among others.

Added to this is the fact that the volatility of the stock market in recent years has left investors in a state of confusion. They are in a quandary whether to invest, hold or sell in such a scenario.

Although a sure formula for success in the stock markets has not yet been discovered, here are some golden rules that, if followed with caution, can increase your chances of obtaining good performance….

1. Avoid the herd mentality

The decision of the typical buyer is usually very influenced by the actions of their acquaintances, neighbors or relatives. Therefore, if everyone is investing in a particular stock, the tendency of potential investors is to do the same. But this strategy is bound to be counterproductive in the long term.

2. Take informed decision

You should always conduct an appropriate investigation before investing in stocks. But that is rarely done. In general, investors go by the name of a company or the industry to which they belong. However, this is not the correct way to put the money in the stock market.

3. Invest in business you understand

Never invest in an action. Invest in a business instead. And invest in a business that you understand. In other words, before investing in a company, you must know what business the company is in.

4. Don’t try to time the market

One thing that even Warren Buffett does not do is try to time the stock market, although he has a very firm opinion about the appropriate price levels for individual stocks. However, most investors do exactly the opposite, something that financial planners have always been warning them to avoid, and therefore lose their hard-earned money in the process.

5. Follow a disciplined investment approach

Historically, it has been seen that even large bullfights have shown episodes of panic. The volatility observed in the markets has inevitably caused investors to lose money despite the large bullfights.