10 Essential Rules for New Stock Investors

10 Essential Rules of Prudent Investing

Stock market is a kind of investment which allows one to be a part of a company’s credibility whose share the investor holds. However, buying and selling of stocks, is not every person’s cup of tea. This needs good knowledge about buying and selling of stocks, experience and most importantly patience. If you are new into the stock market business, it is not easy to successful in one go. But, the following points may help you in making successful stock market investments and save you time and money.

1] Create Trading and Demat Accounts

When you begin with stock market investments, you need to have two accounts namely, stock – trading account and dematerialized account. A stock-trading account will help you to buy and sell stocks or securities. Whereas, A Dematerialized or also commonly known as a demat account is required to get yourself registered as a stock broker. This account will enable you to deposit or withdraw your shares. Both of these accounts can be opened in any bank but prefer opening them in the bank you already have an account.

2] Begin with Small Amounts

Since you are a beginner in the stock market world, it is advisable that when you make investments, you start with a lesser amount rather than a lump sum one. Even if you can afford to out in a large sum of amount, restrict yourself from doing so as this is your initial phase. You can start increasing this amount once you have gained sufficient experience and success. Along with small amounts, you should also try and invest your surplus funds as at this point the risks of investments are high and if you go into any kind of loss, you can afford to lose your surplus funds.

3] Online Trading Account

In the beginning of your stock investments, it is advisable that you have an online account to buy your stocks. With an online account, you can make transactions yourself and track the status of your order. Therefore, having an online account makes things faster and convenient.

4] Do Not Fall Prey to False Advices

There are many brokers who are just waiting for you to enter the stock market so that they can provide you with services they offer. They often guide investors to buy or sell stocks but not only to make the investor successful but also to make money themselves. Most of these advisors or brokers might not even be genuine with their opinions. Therefore, its best to make buying and selling of stocks based on your own decisions and analysis.

5] Maintain Records And Monitor Markets

You will receive a contract note for every transaction. It is important that you save these and take proper notes of all transaction’s dates, selling price, profit or loss etc. This can be recorded by using Excel. This is a good practice as you can track your investments and keep making improvements. With your own transaction record keeping, you should also try and analyse, be well aware of the market and the ups and downs that take place in it on a global level.

6] Participate in The Market

When you are new and inexperienced about a certain subject, you are often very enthusiastic. But in stock market, patience is the key. You cannot get over excited about your initial successes and try to win over the market or compete with it. In fact you need to go hand in hand with the market. This means, analyzing your own needs and capabilities of investment along with the diversity of the market. You should be aware of all kinds of risks that are involved. This way, you will be able to participate in the market.

7] Control Your Emotions

The common mistake a new investor makes is not thinking correctly and following his emotional instincts. Most of them lose money because they are incapable on controlling their emotions. Initially, you might be driven by greed of making money and fear of losing it. You should be able to build you emotional quotient and be psychologically strong. This is must while making any kind of investment.

8] Organize And Lay Out Strategies

For being successful in stock market, it is important that you begin designing appropriate strategies. After designing, the strategy should be implemented correctly so that you are able to understand what to buy and sell and when is the right time to do so. A good strategy will guide you step by step. Your path of progress in stock market will be clear and your investments will be successful.

9] Do Not Have High Expectations

As a new investor, you should not have high hopes and expectations of hitting profit at the very first time. It is important that you have realistic expectations from your investments. Even after you start with a few profits, doesn’t mean that it will last forever, you should be ready to experience loss at any point while buying or selling of stocks.

10] Avoid Derivatives Market And Stock Tips

Warren Buffet calls derivatives market as ‘weapons of mass destruction’ as they are capable of burning down the whole financial system. Therefore, a new investor should stay as far as possible from derivatives. Along with this, new investors should ignore tips and suggestions on stock market from random sources. These tips are not reliable and you can be misled. You should try and seek professional advice in times of distress.

 

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