The first few questions you need to ask yourself before venturing in the market are….. Are you an investor or a trader? Do you have a good risk appetite? Can you wait with your money invested for 10 more years?
Make sure that you know before hand what you are, an investor or a trader. If you are trying both, then separate your investments from your trades, because this might substantially lower the profits that you could have otherwise made.
One should invest only surplus money in the markets. If you don’t have a surplus, don’t invest. Sometimes you might get hold of a stock that you think is the find of a lifetime and you invest huge amounts of money in the particular stock. It might surprise you that the stock price does not rise for a few years at a stretch. Actually this is very much possible. So never ever invest more than 10% of the total investment in a single stock. Diversify.
Do you have the courage to see half of you money in the drains? If you don’t, never invest in ‘Small Caps’, ‘Penny Stocks’ or on the ‘hot tip’ your neighbor just gave you. Always remember the old rule… ‘No risk No reward’
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