Of late, the Indian Equity markets have been improving. It is very important that we don’t get swayed with it and remember the ten basic rules for investing in equity markets.
- Volatility is part and parcel of equity market behavior. Thus, one should enter into it only is he/she can withstand such risk
- Always check the fundamentals of a company, before buying its stock. If its good, go ahead. Else, just shun it.
- Try to refrain from getting into obscure penny stocks to generate big gains. Most of the time, such strategy fails
- Have patience to generate return from stock market. Don’t expect to make money overnight here. It’s not a gambling den
- Borrowing money to invest in equity market is also not desired. If the markets decline, it is a double whammy for the investor – not only does he have to suffer loss but also pay interest.
- F&O are weapons of mass destruction (as said by Warren Buffet). Thus, one should resort to this instrument only for hedging purpose. Using it for speculation is like inviting disaster to oneself.
- One should keep a check on their asset allocation schedule. During market rally time, one has a tendency to take over-exposure in equities; keep a tab on it and rebalance the portfolio at regular intervals.
- Small retail investors can take the help of experts and have exposure in equity markets through mutual funds. This shall ensure decent wealth creation over long term.
- Don’t invest everything in one single stock. It’s better to spread the risk across a basket of 8-10 stocks from different sectors. Such diversification helps to improve overall returns by minimizing overall risk.
- One should invest in equity markets at regular intervals, rather than at one go. Though, it is almost impossible to exactly time the market, but one can adopt a patience strategy of buying during dips. Alternatively, one can also do SIP investment in equity markets either directly or through mutual funds.