Before you invest in the stock market, you should know the stock market dos and don’ts. Stock market dos mean what to follow, and stock market don’ts mean what not to follow.
Stock market dos and don’ts are very important to remember, especially if you are a beginner. After knowing the stock market dos and don’ts, I think you won’t face any trouble during the investment process.
There are several stock market dos and don’ts that can be followed by investors or traders to generate profits. The stock market dos and don’ts will help beginners or immature investors or traders to reduce their mistakes. And thus minimize the risks associated with investing or trading.
The stock market dos and don’ts are given below.
Stock market dos and don’ts
Stock Market Dos: The things you should do or follow
Stock Market Don’ts: The things you should not do or avoid
Stock market dos
The following are the stock market dos.
- You should deal only with the registered brokers. This is the most important point. Before you open an account, check the registration details. And confirm that the intermediary is registered with the exchange. You can ask the broker to show the registration details.
- Beware of fixed or guaranteed return schemes. Nothing is guaranteed in the stock market. Brokers or any of their associates are not authorized to offer fixed returns on your investment. Moreover, they are not authorized to enter into any loan agreement to pay interests on the securities offered by you.
- Be sure that to fill all the required details in the KYC form by yourself and receive the duly sign copy of your KYC document from the broker. Thoroughly check the conditions that you have agreed to and accepted.
- Opt for electronic contact notes or financial statements only if you are computer savvy and you have a valid email account of your own. Do not ignore any email or SMS received regarding the trades done by you. Go through it and check. Verify the trades done by you. Immediately report to your broker in writing if there is any discrepancy. A trade verification facility is available on the NSE website for trades done on the NSE. For trades done on the BSE, the trade verification facility is also available on the BSE website. The trade verification module is a very simple tool to verify trades executed in your account.
- Check the frequency of your trading account settlement opted for and do not ignore to verify your monthly or quarterly settlement statements. If there is any discrepancy, immediately report to your broker in writing.
- Before giving POA (power of attorney) to your broker, read all the terms and conditions. And this is optional. At any point in time, you can cancel the same.
Secondary points (but still important)
- Always do your research regarding stock selection, buying point, selling point, etc. Good research can maximize your profits, nothing else. Belief this.
- If you are planning to invest in stocks for the long term, consider quality and undervalued stocks. Try to find out the true value (theoretical value) of the stock.
- Be patient while buying stocks. Patience is one of the important factors in investing.
- Dividends do not lie. Accept this. So dividend investing is one of the good investment options for long-term money generation.
- Diversify your portfolio. Diversification reduces the risks associated with investing or trading. It is wiser to invest in different sectors.
- Another important point is asset allocation. Get knowledge about this. And properly allocate your assets while you invest. This is what responsible for generating good returns in the long run.
- Do not underestimate the power of compounding over time. So start early. Do not wait as there is no perfect time to enter the stock market. Start early and rich early. Do you know that you could be a crorepati at retirement by just investing Rs. 100 per month? If not, read the following blog post. And analyze how it is possible. Retirement crorepati by just investing Rs. 100 per month
- It is better to do paper trading before you do the actual, especially if you are a beginner.
- Always start with a small amount if you are a beginner.
- Be careful while you do overinvesting.
- Always know your risks and time horizon in investing or trading. It is better to adopt low-risk investing or trading.
- Before you start investing or trading, know the risks associated with it.
- The only thing that works in trading is the money management and risk management.
- If you are trading in stocks, do not forget to put a stop loss. Otherwise, you may lose everything.
- Choose a discount broker as the brokerage is less, compared with a traditional (regular) broker.
- Finally, you are the most important factor, do not forget this. Apply your mind and take correct decisions.
Stock Market Don’ts
The following are the stock market don’ts.
- Avoid the emails or SMSs tempting you to trade in stocks promising huge profits.
- Avoid receiving tips or calls from others. Nothing works well. If you follow tips, your losses will be higher. Mind this.
- Do not listen to anybody even the market gurus. You are much clever than the market gurus. Belief this. If the market gurus are so perfect, why they are not buying shares and getting rich rather than selling advice.
- Avoid high trading fees and brokerage.
- Avoid news-based investing or trading. Do your research even though the news is from a credible source.
- Avoid high-risk investing or trading.
- Avoid over-trading. Like drinking wine is injurious to health, over-trading is injurious to money. Do not forget this statement.
- There is no Holy Grail (foolproof and 100% accurate) in the stock market. Do not waste time for searching such a Holy Grail.
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