7 Key Guidelines for New Investors

Key Guidelines

for New Investors

7

You have your hard-earned money and you now want to invest it to

grow it further. You get suggestions from many people about stocks,

bonds, shares and all the other options available in the market.

Welcome to the world of investment. The market is huge and it is

easy to get confused and scared. But, worry not. The right set of

instructions and helpful guidelines can take you a long way.

Here are seven key guidelines:

Background

Understand

before you

invest

Buying the right stock is the key to yielding good returns. But the

question that arises in your mind is 'how to buy right'?

You are in the buying business, so you need to perform the stock

analysis. Even investment pros like Warren Buffet suggest that you

value business and understand the stock before buying it, instead of

analyzing the market and timing it. Zero down on companies that have

good growth potential.

Understand before you invest

Do not time

the market

When trading in the market, you may often analyze market trends. It is

more important that you understand the trends in the stocks you have

picked, than the whole market. This is because, you need to invest right

and wait for the company to grow.

Do not time the market

Herd Mentality

This is the most common mistake by investors. First-time investors pick

stocks based on their popularity and not the growth potential. Your

reason to buy a stock should be based on the companies’ business

values. It should be a rational decision based on the available facts.

Following the herd mentality during investment leads to heavy loses.

This is the key reason for stock market bubbles and crashes. Most

investors feel that a large group cannot go wrong, and that is why they

invest while following the herd. However, this is the worst thing to do.

An example for this is the Dotcom bubble that burst in the late 1990s.

Herd Mentality

Emotions

It is easy to get attached to your stocks and your choices. Once you

take a decision, it is often hard to accept if it was wrong. For this

reason, keep your emotions at check and do not go into emotional

financing either. Always invest based on rational thoughts and facts.

Emotions

Be Realistic

The next key step is to ‘sit tight’. Though this seems extremely easy, it’s

one of the toughest jobs. Yes! You need to have patience and wait for

your investment to yield right returns. You will not make money in a

matter of a day or week. So, set realistic targets and wait to yield

results. As a first time investor, chances are you would want to sell off

your stocks at the next high point. But remember that day-trading is not

as easy as it sounds and it takes away a good portion of your time.

Be Realistic

Follow a disciplined

approach

Discipline is another important aspect for investment. Discipline

yourself not just to buy the right stocks and wait, but also to make sure

that you diversify your stocks and portfolio to keep risks at edge. Keep

in mind that the targets you set for your return on investments should

be good enough to beat the significant inflation that you see, year on

year.

Follow a disciplined approach

Monitor Regularly

Monitor your stocks. It is best if you look at your stocks once every two

weeks. You can also set alerts if you don’t have much time. Develop a

temperament to re-look and re-evaluate. There is no need to pay

attention to intraday price movements if you are long-term investor. You

do need to keep an eye on the change in profit projections for the year

and the next, and the company’s performance with respect to its peers.

Monitor Regularly

Knowledge is power and wealth. Do not invest without knowing. It is

your money and you must read up before investing.

In a nutshell

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