The is a lot of buzz around the word “stock market”. After covid-19, many people entered the market hearing the buzz. But most of them suffered huge losses. Part of reason for such loss is investing for short term.
In order to create wealth, one need to invest for long term.
Here are some long term investment strategies.
Never chase daily price movement – you are investing for long term. You need not to worry about daily share price fluctuations. If you are involved in daily price monitoring, you are wasting lot of time. Stock market is just our passive income source.
Instead you should invest your time in your own professional work so that you can earn more money from there and invest that in stock market. So focus on earning more.
If you earn more, you have more capital to invest in stock market.
Don’t be emotional and greedy – You should understand that investment decisions are never made in greed.
Decisions should be made based on data and logic. I have investment in 12 stocks. Once I had selected 2 stocks just on the basis of their past performance. Their financials were decent but their growth was extraordinary. I overlooked other factors and fallen for their extraordinary past growth. I invested heavily in these 2 stocks. And the result was that, after 7 or 8 months, one of the company’s stock crashed to half of its original price. And it negatively affected my entire portfolio.
Now, I regret that those 2 stocks ruined my entire portfolio despite the fact that I had invested in other 10 stocks very carefully.
It is very important to prefer data and logic over greed.
Don’t fall for penny stocks – People think that this is penny stock of Rs 2. If it becomes even Rs 20, it will be 10x return. But that’s not the entire case. It can even fall to Rs 0.5.
Firstly you have to understand how share prices works. Consider 2 companies A ltd and B ltd.
A ltd has issued 10000 shares of Rs 1 each, total value being Rs 10,000.
B ltd has issued 10 shares of Rs 1000 each. Its total value is also Rs. 10,000.
Now these two companies have same value of Rs 10,000. This 10,000 will grow. In your eyes, A ltd’s stocks are penny stocks while B ltd’s aren’t. But the fact is that both A lts and Bltd stocks have same value.
So it is not like A ltd’s Rs 1 will become Rs 100 and B ltd’s Rs 1000 will only become Rs 2000.
You should always invest as per data and logic, not as per price.
Ignore stock recommendation from friends and influencers.
You should stick to your own investment checklist no matter what your friends recommend. Even if you want to invest in your friend’s recommended stock, you should invest only after going through your own checklist.
Best is to ignore friends and influencer’s recommendations.
Yes if they have anything knowledgeable to share about market, then why not to increase our knowledge.
Learn more about investing – Two golden rules of investing