The dream of earning big has always lured people into investing in the stock market. However, making money in equities is not that easy. Not only does it need you to be disciplined and patient, it also requires lots of research and a good understanding of the market.
Even though no formula can guarantee you success in stock markets, yet below are given some golden rules, which if you follow diligently, can certainly increase your chances of success.
1. No herd mentality
Usually buyers are influenced by the decisions of their friends, relatives, or acquaintances. So, if everyone is investing in some particular stock, then chances are bright that you might get lured into doing the same. However, remember, that this strategy may backfire any time.
It is very important that you avoid this herd mentality if you do not wish to waste your hard earned money in stocks.
2. Never try to time the market
Never try to time the stock market. Actually, no one has ever done this consistently and successfully over many stock market cycles. Catching the bottoms and tops is only a myth. If you try to do so, you will only lose money.
3. Have a disciplined approach for investment
It has been seen that even the great bull runs have experienced bouts of anxiety moments. The volatility that the markets have witnessed has made investors lose money. However, those investors who invest systematically only in the right shares, and even hold on to their shares patiently, have enjoyed great returns. Thus, it is very important for you to have patience, and follow a disciplined approach while investing, and also keep a long-term picture in mind.
4. Do not get affected by emotions
Many investors lose their hard-earned money in the stock markets because they are not able to control their emotions, mainly greed and fear. While investing, it is difficult to rest the temptation of quick wealth. When investors learn stories of fabulous returns from the market in a short period, they become greedy. This makes them buy shares of unpopular companies, or make heavy positions in future segments, without realizing the involved risks.
Rather than making money, such investors experience heavy loss when the sentiments in the market reverse. In bear market, investors panic and sell their shares at very low prices. Thus, greed and fear are emotions that need to be completely avoided while investing.
5. Keep realistic expectations
Hoping to get the best returns is perfectly fine, but if you have unrealistic expectations, then you may invite trouble. The great bull has indeed offered great returns, but this does not mean you can always expect similar returns from the market. Have realistic expectations, and you will always be happy.
6. Invest your surplus funds only
If you have decided taking risk in such a volatile market, then check if you have surplus funds that you can lose without risks. This does not mean you will lose money, you may even enjoy huge returns in months to come. But, you cannot be hundred percent sure in the stock market, so always take your decision wisely.