TEN TIPS FOR A INVESTOR

Friday, November 13, 2009

1. Do not visit your stock broker every day. The more frequently you go to your broker's office, and listen to the rumors that circulate there, the greater the chances of your being influenced by the crowd opinion of the moment.

2. When you go through the stock market quotations in your daily news paper or through internet, do not focus your interest exclusively on the shares that interests you, the shares that you own, or the shares that you want to buy. Try to also read and remember the quotations of other shares. It will help you to acquire a wider and more balanced perspective.

3. Avoid talking freely and loudly about your investments in social gatherings. In fact, try to steer the conversation to subjects other than the stock market. This is particularly important during periods of extreme optimism and extreme pessimism. People who are habitually prone to be vocal about their investments are normally the first to get drawn into vertex of crowd emotions.

4. Do not take large loans for the purchase of shares. The very fact that you have taken such loans means that your thinking is already being strongly influenced by greed. There is also another disadvantage. In a falling market, heavy loans and the need to pay interest on them periodically, will make you particularly vulnerable to fear and panic. People who are not burdened by heavy loans are seldom pushed by greed and fear into taking foolish decisions.

5. Do not speculate, that is don't buy on margins or try to make money through short-term fluctuations in share prices. Speculators or invariably motivated by greed. They are also normally the first to panic whenever share prices begin to fall.

6. Adopt a long-term investment strategy. A long-term vision and perspective or seldom influenced by current market sentiments.

7. Diversify your portfolio. A concentrated portfolio will make you more vulnerable to fear and anxiety.

8. Invest only what you can afford to loose. Don't depend upon stock market games for running your kitchen, providing the school fees of your kids, meeting medical expenses or paying your apartment rent. In any case, even if you happen to be extremely rich, it would not be prudent to invest more than 50% of your assets in the stock market.

9. Investing your working capital of your business in the stock market is a risky job. That is a sure sign of uncontrolled greed.

10. Do not invest in shares offered through private placements from the promoter's quotes of new and upstart companies.