Stock Chomp: Do’s & Don’ts for Stock Market Investments

The question rises probably every equity investor’s mind is “What should I do now?” With the stock market moving to new heights makes investors excited. Here's what we suggest you do when the bulls and bears kick up a lot of dust.

Don’ts

1. Don't panic

The market is volatile. Accept that. It will keep fluctuating. Don't panic. If the prices of your shares have fall, there is no reason to want to sell them in a hurry. Stay invested if nothing fundamental about your company has changed.

2. Don't make huge investments

When the market dips, go ahead and buy some stocks. But don't invest huge amounts. Pick up the shares in stages. Keep some money aside and zero in on a few companies you believe in. Most importantly keep buying the shares periodically.

3. Don't chase performance

A stock does not become a good buy simply because its price has been rising phenomenally. Once investors start selling, the price will drop drastically.

4. Don't ignore expenses

When you buy and sell shares, you will have to pay a brokerage fee and a Securities Transaction Tax. This could nip into your profits especially if you are selling for small gains (where the price of stock has risen by a few rupees).

Do’s

1. Get rid of the junk

If shares you have bought before are showing a profit, you could consider selling them. Even if they are not going to give you a substantial profit, it is time to dump them and utilize the money in other if you no longer believe in them.

2. Diversify

Make sure you are invested in stocks of various sectors. Do not invest all your fund in same sector.

3. Believe in your investment

Don't invest in shares based on a tip, no matter who gives it to you. Analyze the fundamental of company, future potential of products and services and then make decision whether to invest or not.

4. Stick to your strategy

Stick to your stock allocation. Do not over exceed or limit your shares portfolio.

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