1. Not
being disciplined and failing to cut losses at 8% below the purchase price
A strategy of selling while losses are small is a lot like buying an
insurance policy. You may feel foolish selling a stock for a loss -- and
downright embarrassed if it recovers. But you're protecting yourself from
devastating losses. Once you've sold, your capital is safe.The 7%-8% sell
rule is a maximum, not an average. Time your buys right, and if the market
goes against you the average loss might be limited to only 3% or
4%.
Again its to be kept in mind, do not to sell a winning stock
just because it pulls back a little bit.
2. Do not purchase
low-priced, low quality stocks.
3. One should follow a system or
set of rules.
4. Do not let emotions or ego get in the way of a
sound investing strategy You may feel foolish buying a stock at 60,
selling at 55, only to buy it back at 65. Put that aside. You might have
been too early before, but if the time is right now, don't hesitate.
Getting shaken out of a stock should have no bearing on whether you buy it
at a later date. It's a new decision every time
5. Invest in
equities for long term and not short term
6. Do not make unplanned
investing and starting without setting clear investment objectives and
time frame for achieving the same.
7. Not having an eye on what the
big players / mutual funds buy & sell is a pitfall and an opportunity
lost to pick the right stocks. It takes big money to move markets, and
institutional investors have the cash. But how do you find out where the
smart money is going? Make sure the stock you have your eye on is owned by
at least one top-rated fund. If the stock has passed muster with leading
portfolio managers and analysts, it's a good confirmation its business is
in order. Plus, mutual funds pack plenty of buying power, which will drive
the stock higher
8. Patience is a virtue in investing. Do not panic
on your existing stocks. It's so important, we repeat: Be patient for your
stocks to reap rewards.
9. Do not be unaware of what is happening
around in the market. As always, knowledge is power and in investing, it's
also a comfort. Dig for more information other than just the top stories
that are flashed.
10. Do not put all your money on the same horse.
Diversify your portfolio ideally into five industries and ten
stocks.
11. Margin is not a luxury, it is a deep-seated risk, know
your risk profile and use margin trading sparingly. You as an investor
might lose control of your investments if you borrow too much.
12.
Greed is dangerous; it may wipe out the gains already made. Once a
reasonable profit is made the investor should get out of the market
quickly.
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