The lure to earn good money always entices an investor towards stock market trading. An investor still wants to make a handsome profit in stocks, irrespective of his experience in the market. It is easy to fall for the temptation to earn quick money, but a good strategy in place is essential to protect investments and make decent profits. The investor needs to have discipline and patience and should be able to do intense research with a good understanding of the market. There are specific rules that can be followed to increase profits on investment.
Know the Kind of Trader You Are[i]: There are two kinds of traders in the market, one who follow fundamental investing and the other who are speculators. Investors following fundamental investing give lesser importance to the price of a stock than the speculators and are more concerned about the primary strengths of the company. Fundamental analysis of investing is likely to bring better profits to investors.
Avoid Herd Mentality: For several investors, their buying and selling decisions regarding a stock are based on the choice of their acquaintances. Such strategies do not work well in the long run.
Never Time the Stock Market: Expert investors always advise never to time the stock market as it is not possible to accurately catch up the top and bottom prices of a stock. Doing this can lead to losing one’s hard-earned money.
Be A Disciplined Investor: Investors who invest their funds with a disciplined approach manage to generate outstanding returns. One should always have a systematic approach for investment to get gains in the market.
Avoid Letting Emotions Influence Judgement: Investors who are unable to have control over their emotions in investing generally lose a lot of money in the market. Investors have the excitement of making more money in a bull market and tend to invest in the wrong shares ultimately. Greed and fear should be kept aside while investing in the market to avoid losses.
Having Realistic Goals: The investor should never expect the same results from the stock market. It is advisable to hope for the best from the investment made but never has unrealistic financial goals as it can lead the investor into trouble.
Investing the Surplus Funds: As an investor, one should always develop the habit of spending the surplus funds into the market. When the investor starts gaining profit on the investments, the same amount should be used to reinvest rather than going for other options like loans or debts.
Do Your Homework:[ii]As an investor, one should invest in the stocks one knows about and take time to learn about the stocks one doesn’t know. Investing blindly, without studying a company reduces the chances of profit earning on the investment and leaves the ventures to blind speculations.
Have A Broad Portfolio: An investor should consider the portfolio ideally across several stocks to earn optimum results through minimum risks. This diversification differs from investor to investor, but in every case, it helps the investor to cope up with the volatility of the market which comes as part and parcel of the stock market.
Rigorous Monitoring Is A Must: It is important to regularly keep track of news and events related to the company has invested in that can affect its stock price.