Most Important 10 Rules of Investing in Stock Markets

The stock market is a very complex, sensitive, and technical place. There are no set of rules or method by which profit can be ensured. Because a lot of factors are waving here and these factors are never constant- they keep changing. So, you must be very cautious and extra careful when you invest in this market; or else there is always a risk of incurring the loss. However, following some rules may help you do well in this market and undoubtedly the risk factor will minimize.

Here, we bring 10 most important rules for you which are acknowledged worldwide. However, we suggest you make your own decision following these rules based on the circumstances that may be put in front of you.

1. Split Your Investment Into Parts

The money you have on your hand for investment, divide it into separate parts. Invest each part in different sectors. Let’s say, you have 30,000 USD for investment. So in this case, invest 10,000 USD in the Stock market, keep 10,000 USD for savings and the rest 10,000 USD, you can buy land or utilize the cash on buying other personal property. Investing in different sectors like this will reduce the risk. So, if you incur the loss in one sector- you could make up for it from the profit earned from the other one. So, do not dare to put all your investment into the share market or in one sector alone.

2. Invest in Active Shares

It is better to keep an eye out for some aspects before investing in the share market. One of them is the fundamentals of the company. What the company manufactures, where do they sell their manufactured goods, sales in the past few years, profits and revenue records. Besides that, you should give special importance to this particular aspect. That is you should see whether the shares you are planning to invest in are active-shares or not. It means whether the particular shares are being traded every day or not. Because when you invest, you might want to consider pulling off your investments anytime easily. Buying shares that are not being traded on a regular-basis might end you up in deep trouble. You will not find buyers for the shares, or sometimes you will have to sell them for a lower value. What happens then is that either your investments are halted or you have to get out of it with a loss.

3. Plan Wisely Before Investment

It would be best if you always had a plan before buying any shares. It is wise to consider thinking about how much profit you expect from your stocks and how much loss are you willing to incur before pulling off your investment by selling those shares. Let’s say, for example, You invest in the stock market with an expectation to make 10% profit of your shares. Share value keeps rising, and you might wait for the profits to hit 15% to 20%. But remember, it is not good to be greedy seeing the prices hiking up. Do not listen to rumors. It is better to sell the shares on time instead of expecting more profit. Because if you do not sell them on time, you might have to face loss instead of counting profit.

4. Too Much Transaction is Not Wise

An excessive stock exchange is not a very good thing. It would help if you made your exchanges wisely according to a plan. It is useless for you to get impatient for buying new shares the same day you sold your shares. Rather be patient and develop a plan. Carefully observe the situation of the market, is the share’s value fit for investment or not.  You cannot expect to make a profit off shares which were bought for a much higher price.

5. Invest in The Selected Shares

There are many enlisted companies in the stock market. It is better to invest in 5-10 companies out of the list. If you buy shares from too many companies, it will be hard for you to keep a record of all your shares.

6. Find Out About The Stocks Before Invest

You should gather some information about the stocks you intend to invest in. It is not right to blind-trust and listens to your family members or friends and invests in the stock market. Sometimes we hear, that share’s value will increase by 20%. Another share’s value will decrease by 30%. Warren Buffett has this famous quote to say about the stock market, “Remember that the stock market is a manic depressive.”

So do not listen to these rumors. Instead, if you get such authentic news, you should investigate it yourself and confirm it. You should identify-

a) If there any hidden information about the company.

b) Whether there will be any changes in the business in the relevant sector.

c) Take an in-depth look at every obvious fact which can create an impression on the stock market index.

Finalize your investment decision only after that analysis.

7. Do Not Dream of Making Profit Every Day

In the stock market, there are sometimes when you are making a profit every day. But you cannot guarantee that it will be like this all the time. Investing with such expectation will be an act of foolishness. Too much high expectation might turn your investment plans to be wrong.

8. Learn to Refuse Profit

It is better to sell the shares after making an expected profit instead of expecting more profit from the stocks. So the profit showing in the papers will be in your account. It’s better to have the money in your account rather than just only in the paper. So, develop the habit of refusing too much profit over investments. Instead of reinvesting the entire profit back into the shares, keep a part separately and invest it in other sectors.  Moreover, if you do not find a suitable sector, at least you could save the money in the bank in a fixed deposit. This way, your risks will minimize.

9. Be Prepared For Bad Times

Rise and fall of stock value is a daily scenario in the stock market. You could have invested in a lively exchange, but sometimes the tide may change before you start collecting profits. Likewise, seeing a rising share value, you could have invested in it, but the value might decrease before the shares matured. So, be prepared to face such bad and hard times.

10. Find Information in Rumor

In the market, you will always hear rumors floating around about the companies here. Amongst those rumors, some might have a hint of truth in them. However, do not listen to any rumors blindly. The best you could do is investigating the origins of the rumors and look for any truth in it.

All we want to suggest is that follow a disciplined investment approach considering these 10 rules.