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Thread: some Do's and Don't in Stock Market

  1. #1
    Enthusiast swapnil15's Avatar
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    Thumbs up some Do's and Don't in Stock Market

    What you Must NOT Do in Stock Market
    Don't panic
    Don't make huge investments
    Don't chase performance
    Don't ignore expenses
    Don't panic


    What You Must Do in Indian Stock Market

    Don't panic Get Rid of the Junk
    Diversify
    Belive in your Investment
    Stick To your Strategy



    What you must NOT do

    1. Don't panic

    The market is volatile. Accept that. It will keep fluctuating. Don't 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.

    Ditto with your mutual fund. Does the Net Asset Value deep dipping and then rising slightly? Hold on. Don't sell unnecessarily.

    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.

    Keep some money aside and zero in on a few companies you believe in.

    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.

    It is impossible for an individual to state when the share price has reached rock bottom. Instead, buy shares over a period of time; this way, you will average your costs.

    Pick a few stocks and invest in them gradually.

    Ditto with a mutual fund. Invest small amounts gradually via a Systematic Investment Plan. Here, you invest a fixed amount every month into your fund and you get units allocated to you.

    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.

    Ditto with a mutual fund. Every fund will show a great return in the current bull run. That does not make it a good fund. Track the performance of the fund over a bull and bear market; only then make your choice.

    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 (where the price of stock has risen by a few rupees).

    With mutual funds, if you have already paid an entry load, then you most probably won't have to pay an exit load. Entry loads and exit loads are fees levied on the Net Asset Value (price of a unit of a fund). Entry load is levied when you buy units and an exit load when you sell them.

    If you sell your shares of equity funds within a year of buying, you end up paying a short-term capital gains tax of 10% on your profit. If you sell after a year, you pay no tax (long-term capital gains tax is nil).

    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.

    Similarly with a dud fund; sell the units and deploy the money in a more fruitful investment.

    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.

    To balance your equity investments, put a portion of your investments in fixed income instruments like the Public Provident Fund, post office deposits, bonds and National Savings Certificates.

    If you have none of these or very little investment in these, consider a balanced fund or a debt fund.

    3. Believe in your investment

    Don't invest in shares based on a tip, no matter who gives it to you.

    Tread 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.

    Are you happy with the way a particular fund manager manages his fund and the objective of the fund? If yes, consider investing in it.

    4. Stick to your strategy

    If you decided you only want 60% of all your investments in equity, don't over-exceed that limit because the stock market has been delivering great returns.

    Stick to your allocation.

  2. #2
    New Member Rniks's Avatar
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    Thumbs up

    Yes, agree to your points and want to add 1 more thing that, Dont make any harsh in stock markets, you have to do R&D before going to purchase any companies shares...Just keep your eyes and ears open and updated yourself with Latest Market updates. You can visit Profit.ndtv.com/Markets for updated market news!

  3. #3
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    Default no panic?

    how can you not panic when the market goes down? what kind of advice is this???


  4. #4
    Aficionado dcsmon's Avatar
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    Umm unregistered, he means that if you panic, you can't make the right decisions. Rather you would do something that would worsen your conditions.

  5. #5
    New Member vjyoga's Avatar
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    hi.. gives a lot of light as to how one should act now....

  6. #6
    New Member pardhu8's Avatar
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    Nice information for the new investors.The best principle which i follow is start investing as early as possible and invest monthly i.e through SIP.If we can invest for longterm we will definetly get benifited from it.

  7. #7
    Enthusiast joosh00's Avatar
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    Thanks For Sharing, Very Helpful.

  8. #8

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    I respect and appreciate your excellent sharing the great tips, it's very useful. The only thing is need further more explanation from you about your tips on; (copied and pasted)

    2. Don't make huge investments ~ "Keep some money aside and zero in on a few companies you believe in."


    What criteria should I use to "believe in"?. Sorry for my asking this type of question. Thanks in advance.

  9. #9

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    The point is that whatever system you create or buy, provided it is valid in one market, might then be adaptable for use in several others as well. Once you have a profitable trading system, you have the potential to trade many markets in a relaxed and efficient manner, making money overall from all of them.

    In order to trade in the stock markets, you must have a broker of some sort. By using the internet, you can now do fundamental and technical analysis of the markets online, often for free, in order to make an informed decision. By doing so, you can manage your investments effectively and well.

  10. #10

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    Thanks for the great tips

    Also When choosing a website to use for Forex trading information and support look for a site that has plenty of information. The more information that you can have access to and read the more likely you'll be successful. Look for info that is presented in terms that you can understand.

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