10 Golden rules to pick quality stocks for the long term!

The lure of massive cash has perpetually thrown investors into the lap of stock markets. However, creating cash in equities isn’t straightforward. It not solely needs mountain of patience and discipline, however additionally an excellent deal of analysis and a sound understanding of the market, among others.

Added to the current is that the proven fact that stock exchange volatility within a previous couple of years has left investors in an exceeding state of confusion. they’re in an exceedingly perplexity whether or not to speculate, hold, or sell in such a state of affairs.

1. Avoid the herd mentality

The typical buyer’s decision is usually heavily influenced by the actions of his acquaintances, neighbours or relatives. Thus, if everybody around is investing in a particular stock, the tendency for potential investors is to do the same. But this strategy is bound to backfire in the long run.

2. Take informed decision

Proper research should always be undertaken before investing in stocks. But that is rarely done. Investors generally go by the name of a company or the industry they belong to. This is, however, not the right way of putting one’s money into the stock market.

3. Invest in business you understand

Never invest in a stock. Invest in a business instead. And invest in a business you understand. In other words, before investing in a company, you should know what business the company is in.

4. Don’t try to time the market

One thing that even Warren Buffett doesn’t do is to try to time the stock market, although he does have a very strong view on the price levels appropriate to individual shares. A majority of investors, however, do just the opposite, something that financial planners have always been warning them to avoid, and thus lose their hard-earned money in the process.

“So, you should never try to time the market. In fact, nobody has ever done this successfully and consistently over multiple business or stock market cycles.

5. Follow a disciplined investment approach

Historically it has been witnessed that even great bull runs have shown bouts of panic moments. The volatility witnessed in the markets has inevitably made investors lose money despite the great bull runs.

6. Do not let emotions cloud your judgement

Many investors have been losing money in stock markets due to their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist. Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time.

What we learnt about Investing in Quality Stocks 740x261 1

7. Create a broad portfolio

Diversification of portfolio across asset classes and instruments is the key factor to earn optimum returns on investments with minimum risk. Level of diversification depends on each investor’s risk taking capacity.

8. Have realistic expectations

There’s nothing wrong with hoping for the ‘best’ from your investments, but you could be heading for trouble if your financial goals are based on unrealistic assumptions. For instance, lots of stocks have generated more than 50 per cent returns during the great bull run of recent years.

9. Invest only your surplus funds

If you want to take risk in a volatile market like this, then see whether you have surplus funds which you can afford to lose. It is not necessary that you will lose money in the present scenario. You investments can give you huge gains too in the months to come.

10. Monitor rigorously

We are living in a global village. Any important event happening in any part of the world has an impact on our financial markets. Hence we need to constantly monitor our portfolio and keep affecting the desired changes in it.

Discussion on India Stock Market