It is no secret that the stock market can be a highly uncertain place. However, some principles have survived the test of time and have brought success to plenty of investors over the years.
Because you, our user base, is primarily interested in the stock market. We decided to round up some of those principles from a wide variety of sources across the web, including expert websites like Invezz and advice from online traders.
1. Hold on to a winner
Certain investments can increase manifold in value. They can bring you a lot of money, but for that, you need to hold on to them even if they have increased many times before. If you think that the stock can continue increasing in value in the future, then you should discard the traditional rules and hold on to it for its own merit.
2. Sell the loser as soon as possible
Once a stock loses money, there is no guarantee that it will gain money in the future. You have to live in reality and bite the bullet if you see a stock performing poorly for a consistent span of time. It is difficult to acknowledge the presence of losing stocks, it makes us feel like we have failed in an important exam, but it is only human to make mistakes. Instead of holding onto the stock and losing even more money, it is better to sell it off to prevent any losses thereafter.
3. Be careful of what you listen to
A stock tip may sound realistic, but that doesn’t mean you go chasing after it. Before making any investments, conduct thorough research about the company. Sometimes, tips actually do work, but it is a risk nevertheless, and you should always know where you are investing your money.
4. Don’t sweat too much about the P/E ratio
A lot of investors emphasize price earning ratios to a ridiculous degree. It’s not a very good thing to do, because P/E ratios are most effective when used in combination with a list of other analytical processes. A low price earning ratio does not undermine the security of the stock.
5. Select a strategy and then hold on to it
There are many ways in which you can select stocks. However, no matter which strategy you choose, make sure you stick with it throughout. When you move from one approach to another, you become a market timer, which is not a good place to be in.
6. Always keep the future in focus
When you invest, you will be required to keep yourself updated and make all decisions after a careful analysis of the prospects. Instead of the past of the company, look at its future. If you feel that the stock’s value can skyrocket a couple of years from now, don’t stop yourself from investing money in it.
7. Keep an open mind
Not all good investments are backed by brand awareness. So, do not discourage yourself from investing in a company just because it is not a household name. If it seems like a good investment opportunity, you should go for it.