Six Rules for Stock Investment

The stock markets have crashed all over the globe bringing grief to millions of people. Millions have lost their hard-earned money, just by listening to the advices of the so- called investment bankers, gurus and stock market analysts. Now it is the time to introspect on what went terribly wrong and did all the analysts lead the people, the wrong way. They have neither forecast the slide nor have even an inkling of the impending doom. All the leading advisors and analysts are as human as us and they only give advice without battling an eyelid by taking hefty salaries. After having observed the recommendations of the analysts being torn to pieces, then the question that comes to mind is that what is the way is forward for individual investors.

Here I suggest some earthly ideas that can be utilized while taking a decision to invest even in these troubled times.

Rule # 1:

You have to keenly observe the economy as a whole and make out the sectors which are performing better even in these days. Even in bad economic times, certain sectors like pharmaceutical, agricultural commodities and essential consumer goods do well. You can pick out the companies that show growth in times of distress all round and zero in on them for investment. You can look out for P/E ratios and the market capitalization ratios to determine their efficiency with respect to peers in their industry. You can choose the one with best performance in the past one and half years to invest. This makes a case where you stand to benefit significantly once the economic woes lessen.

Rule # 2:

Stocks are measured in terms of volatility index of the sector. If the volatility index rises further a particular benchmark, then it is an indication that you should exit the stock immediately. You can reenter the stock, if the volatility index falls to a certain level. It essentially means that your entry and exit must be between those points where the comfort factor is there.

Rule # 3:

You must always have a stop-loss point beyond which you should not continue in that stock. This helps you to minimize your losses. The stop-loss point is the point at which you are comfortable with, even with losses. In a falling market, stop-losses are important to provide cushion to steeply falling market conditions. The market is fluctuating wildly with no direction and hence stop-losses are important to survive in the market.

Rule # 4:

If you want to investment in stock market, the decision making power must be in your hands. It must not be entrusted to others. Once we are in control, we can take quick decisions depending on our risk appetite.

Rule # 5:

You must be prepared to be in the stock market for longer duration to reap the benefits completely. Investing in stocks is just like Wohnung Kaufen Köln. You have tyo make sure that it is marketable and has less risks so you can ensure that you can gain profits from it. 

Rule # 6:

You need to invest from your own money rather than borrowing for short term duration, anticipating quick returns. This usually takes you to doom.

If prudently invested, even now you can pick good stocks for great returns.

Linda Alvarado loves writing about technology and science updates. She also loves to keep her mind and body fresh by doing intense workouts and meditation sessions.