Certain golden rules for investment in shares need to be remembered at all times under all conditions that govern the stock market. You have seen the traffic signal colors, red, amber and green–stop, look and then proceed. One visiting the stocking market for the first time or even the regular investor must remember these signs. What is profit through stocks? It is mainly cashing on the intelligence of other persons, through your intelligence. No one comes to the stock market with the intent to lose. Everyone wants the profits as quickly as possible. Many carry the feelings that the stock market is the granary of profits. Fields with ready harvest-just go and pluck the ripe fruits! You feel you are the owner of a perennial fruit-giving tree!
And suddenly there is a tempest! The ripe and unripe fruits fall to the ground. The flowers wither away…. with a loud thud, the tree crashes to the ground right in front you, as you watch helplessly. All your hopes are shattered. That was the position of the investing public when the markets crashed in 2008.
When you own the stocks, the normal expectation of even the conservative investor is to watch the company grow, receive dividend checks regularly and get periodical bonus shares. Since the industrial revolution, stocks have been important financial instruments for building wealth through a good and imaginative investment portfolio. The stocks listed in the Exchange are in thousands, the internet revolution has made it possible to trade in stocks in any part of the world.
Stocks are popular mode of investment with the common man, and most of them do not know the technicalities involved in making the investment decisions. Popular talks, deliberate misinformation, get-quick-rich mentality, belief that investment in shares is the magic answer for amassing wealth play their roles in this area. Guidance from the brokers is accepted, for the common man has no time for making detailed analysis for each and every share listed in the Exchange, but the best option is to make one’s own decisions for investment, and gradually learn the importance of timing in buying and selling shares. Selling the shares well in time to maintain the correct balance of the portfolio is as important as buying. One steeply sliding share may undo the good that has been happening to your portfolio through rises in other shares. The basic issue is, you must know what the numbers under various heads in the balance sheet of a company mean. Such a study helps you to avoid costly mistakes.
Whether it is long-term investing or short-term investing, you need to know where to begin and the amount that you are willing to invest. A good grasp of the broad perspective of the market is the fundamental requirement. With the internet revolution the exchange of information is very fast. The best company may face severe competition to its products by similar innovative products being produced in a distant country and made available with excellent market strategy.
The new technological innovations have the potentiality to wipe out a particular product from the market as the common man may discontinue using it, in preference for the new product. Granted that you have arrangements to handle your portfolio with the broker, that doesn’t mean you need to relax your guard. It is your money. Remember what happened to the market two years ago. The financial analysts, the brokers, the economists, the banking advisers, the mutual fund experts—all of them failed and the stock market played truant with millions of investors and brought their doom! Turn the pages of the history of the stock market and learn lessons how the market has been a great leveler!