Sunday, November 27, 2022

How not to burn in the stock markets! 10 principles to keep in mind while investing

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Dear friends, first time investors: You have experienced the joys of a stock market that has grown like a phoenix, driven by rapid economic recovery after the novel coronavirus virus epidemic.

Some of you are now temporary, having taken some “hits” in a volatile market. The environment is moving towards being wary of euphemisms.

How can you navigate this uncertain, volatile environment and ensure that your portfolio is healthy?

To keep you out of harm’s way, here are 10 principles along with a list of investors with the most common errors:

  1. When to buy it is more important than selling
    • You are emotionally involved with investments that are doing well. You never want to sell these winners
    • Some investments have been in deficit for a long time; You are wary of booking losses
    • You have not defined the stop-loss limit
  2. Buying is more important than when to buy

• Do you think the market is the most important factor at the time of investment
• You buy stocks that are low in value and have a low P / E (Earnings Value). Do you think the price of these shares is cheap and will increase when the market improves. You might think that high-value and high-value (high P / E) are expensive, with limited scope for appreciation.

  1. Never be a better seller in a fast falling market

• You leverage (borrow funds) to invest in markets; To increase returns in a growing market
• You do not like to have emergency funds (in a bank account); You like to work your money all the time

  1. Buy what can be sold (it will have liquidity) in a falling market
    • Your stock portfolio consists mainly of small-cap or mid-cap
    • Your other investments are largely absolute (eg real estate, closed-ended funds).
  2. Figure out how to deal with the investment PARADOX:
    (A) To win big, you must place focused bets; (b) To lose less, you must diversify
    • You have not thought about asset allocation for your portfolio
    • You have not defined defined return objectives and risk tolerance for your investment
  3. reflect the collective “feelings” of market participants
    Understanding that if their “features” are at the peak, then you can be the biggest lever
    • You never question whether extreme conditions (highs or lows) in the markets seem appropriate or appropriate.
    • You think that it is always best to follow the market trend
  4. Fear of Missing (FOMO)
    This frame of mind is likely to be your biggest (and stupid) mistake.
    • You find it difficult to stay on cash in your portfolio – you cannot resist the urge to participate in action
  5. Just because nothing good happened does not mean that there was no risk
    • You never assess what can go wrong in investing where you make a profit – what risk did you take to generate that profit, and was it worth it?
    • You are obsessed with getting winners; You rarely think about reducing the loss
  6. The goal of investing is to secure your financial future – if you are in it for the thrill; None of the above applies!
  7. Nobody Knows! You can’t predict, but you can be ready!
    Happy investment!
  8. Also read : China opens its borders to import billions of dollars of gold
  9. Also read : Commodities get out of the way behind the US dollar, but the challenge of increasing cases of COVID-19 remains.

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