Four Jumbo Rules of Stock Market Investing

Choose the right company

Four Jumbo Rules of Stock Market InvestingI have seen most people these days are looking for long term investments in Real Estate stocks like Unitech, DLF just because they are 70% down from their recent high. They don’t want to consider the company’s fundamentals. Real Estae sector is badly hit  by increase in the interest rates, Govt banks are not willing to give them loans etc.

So  Look for superior growth. The company should earn at least 20% return on its equity. A company which is showing sustainable growth in the profits year by year,

Ideally a long-term investment is considered to be a investment of more than five years. It  allows you to participate in the company’s growth. Investment in equities for a period of 3 years is not a Investment, it is a trade

Be disciplined

Stock investing is a long, learning experience. You will make mistakes,. Here is what you can do to ensure a smooth ride.

  • Don’t put all your eggs in a single basket
  • Don’t put more than 10% of your Investment in a single stock
  • Have atleast 15 stocks in your Portfolio to diversify the risk
  • Have atleast stocks from  5 different sectors so that one bad news in a particular sector doesn’t hit your Portfolio adversely
  • Use assest allocation tool looking at your age & Risk Profile. Normally the rule says 100 minus age should be your Equity Exposure
  • Resist temptation to buy on fake SMS send by share tips companies

Monitor and review

Regularly monitor and review your investments. Hire a financial advisor to monitor your Investment Portfolio. If there is doctor to take care of your physical health, then why not a financial planner to take care of your financial health, which is equally important, that is what people are living for.  Keep in touch with quarterly results announcements and update the prices on your portfolio worksheet at least once a week.

Invest Regularly

One of the most important rules of finance. Invest regularly, that may be monthly, quarterly depending on your personal comfort level. Markets will remain volatile for most part of the year. But if you are investing regularly, you are making sure that you are also investing at lower levels which will reap you benefit in a long run

Thanks ;
Mr. Mayank Gupta, MBA Finance,  CRISIL
Wealthbazaar.in

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long term investment, long term investment tips, stock market guide, long term stock tips

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