Last week we understood what according to legendary Investors like Benjamin Graham and Warren Buffett, are some of the most important things that are required to succeed in Stock Market Investing. Now this week I shall tell you about some basic rules which every new comer must follow while investing in stock market.
Repeating what I had told earlier as well. Although stock market is a great place to make a fortune in long run, most of the new comers lose money in it. This is mainly because of their unrealistic expectations of getting rick quickly via investing in stock market.
If you are a new comer, who has started investing in stock market recently then it is possible that you have seen only good days, i.e., one-sided upmove and would be considering stock market investing to be very easy. But the reality is very far from different. In reality, Stock Market is a place to make easiest money in the hardest way.
If you are a beginner then before proceeding to investing in stock market, we would advise you to first learn the basics of stock market investing including fundamental analysis of stocks.There are several books available in market which can be helpful to learn everything.
Warren Buffett has pointed out that you don't need to brilliant to be a great investor, he quotes -
If you are a new comer than you should follow some of the below mentioned rules while investing in stock market -
- Never invest in stock market using borrowed money or your emergency savings.
- Only invest in a business which you understand.
- Always invest for long term.
- Always go with blue-chip companies
- Avoid buying penny stock or cheap stock.
- Never blindly buy any stock on advice of others (like broker, TV expert, research analyst, friend, etc). Always do your own research before investing in any stock.
- Do not get greedy and never go for speculative and risky activities like day trading or derivatives trading, especially when you are new.
- Do not invest all your money in one company. Try to diversify your investments.However, do not diversify a lot.
- Always keep on learning and try reading good books in investing.
- And most importantly, start with investing small amount and that should be such an amount which you can afford to lose.
Always remember,what Benjamin Graham advises to beginners.
This is what he quotes -
We urge the beginner in security buying not to waste his efforts and his money in trying to beat the market. Let him study security values and initially test out his judgment on price versus value with the smallest possible sums
~ Benjamin Graham
Next week I shall explain How to Manage Risk while Investing in Shares.