Investing your money in the stock market is not as
difficult as it looks. All you need to do is plan your investments properly for
getting the best outputs. Here are some tips that can help you in your
Everyone is looking for a quick and easy way to riches and happiness. It seems
to be human nature to constantly search for a hidden key or some esoteric bit
of knowledge that suddenly leads to the end of the rainbow or a winning
Investing regularly, avoiding unnecessary financial risk, and letting your
money work for you for years and decades is a certain way to amass significant
assets. Buying stocks isn’t hard. What’s challenging is choosing companies
that consistently beat the stock market.
Take losses when you are wrong
No one likes to take a loss but losing is part of making money. You have to
recognize that the stock market can not be predicted with 100% certainty and
accept that being wrong is ok. When the market proves your decision wrong,
take the loss!
Sell when there is irrational buying
When the mass media is espousing the virtues of an investment, when people
who know less than nothing about investing are dumping money into the
market, it is probably time to be a seller. If the upward trend goes from being
linear to a curve, watch for signs of weakness as the upward trend is nearing
its end. At this point, the volume will often be much higher than normal and it
will seem as though the stock can do nothing wrong.
But when there is panic selling
The emphasis here is on panic selling, where the overwhelming pessimism has
people accepting prices that make no rational sense. Don’t confuse a bear
market with panic selling; weakness is not a reason to buy unless it is
motivated by panic. Contrarian investing is only effective when emotion
causes stocks to be mispriced and that comes with panic selling.
Don’t follow the crowd
The average is what most people are doing; do you want to be average? It is
only a small percentage of the population that has most of the money and they
are making it from the largest group. If you want the money to flow your way,
you have to be ahead of the crowd, do things before it is popular.
Test before you trade
To make money in the market, you need a strategy that has an edge. Don’t
make investments on a hunch or what someone else tells you to do. Make
investments based on a set of rules that you have tested and proven to be
successful. Every great trader has a formula, what is yours?
Keep it simple
Investors tend to get more sophisticated as they lose money. If their set of
rules are not working, they add more rules. However, it is not usually the rules
that are the problem; it is the application of the rules. People who make
money keep it simple but work very hard at being disciplined and
unemotional. Easy to say, hard to do.