THE BULL-BEAR GAME: WHAT TO AND WHAT NOT TO!

Plenty of Money.
Read that again.
Plenty of Money.
Isn’t it beautiful? $_$

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Are you constantly looking for quick access to this sort of beauty? Let me do the honours, the Stock Market might just be the paradisiac setup for you!
That being said, making money in the stock market isn’t all that easy. It calls for sound research, market-understanding and of course, patience, discipline and a wee bit of intuition.  Here are a few vitals to raising your chances of intelligent stock-trading:

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1. Never ever time the market:
This is a direct tip from the greatest investor of all time, Warren Buffet himself. By this, it is meant that traders must never try  a hand at catching the tops and bottoms of a stock. This could possibly end up in loss of hard-earned money, which definitely is the last thing that we want.

However, this does not mean that one mustn’t have views on individual stock prices. After all, that is the basis of decision-making.

2. Acquaint the road not taken:
It’s typical for traders to take up the road always taken. That shouldn’t be the case if you’re looking out for big money in the long run. Nonetheless, the herd mentality shouldn’t be dropped all the way! It would make good short term strategy and can also be a bank for protecting your hard-earned cash.

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3. Be practical with your expectations:
It wouldn’t be fair if you’d multiply your portfolio by a thousand times over a week, would it? Hence, be realistic with your expectations and accordingly, channel your efforts. Always be eager to gain information. The information gained must be analyzed and the possible returns should be calculated with prudence.

Therefore, one must take decisions matching risks with returns and always hope for the ‘best’.

4. Let not emotions overpower rationality:
It so happens many a time that investors are emotionally held up to certain stocks. Even though this hold doesn’t take up the exact form as Indian television serials do with the women, it is subtly destructive.

As such, investors may tend to put all their cash on stocks that may once upon a time have had stable performances and are now travelling to the earth’s core. This wouldn’t be rational if the situation that surrounds the company is worsening in a real bizarre fashion.

Thus, you’ve got to “listen to your brain and never your heart.”

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5. Volatility means use Surplus funds alone:
When the market is as volatile as it is now, I would always advise an investment that is sourced by your surplus funds. Ergo, one must always ensure that they have enough affordability of loss with their surplus funds.

However, this doesn’t apply if you’re in a run for risky money! Risky money is big money. Thus, it deserves every other penny of yours that may or may not come with a surplus.

6. Discipline is key:
Over the years, success in the share market has been characterized by patience and systematic behaviour. As such, investors who have systematically maintained their portfolios, and have patiently held up on reliable stocks have flourished.

Also, it is key to understand the market, comprehend well the implication of happenings and diversify your investments.

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7. Portfolio Monitoring:
The world is one global village. As a result, happenings anywhere can possibly affect your portfolio.  Thus , one must actively observe the dimensions of the business environment that externalizes the businesses that forms their investment portfolio.

This not only helps avoid drop-to-death losses, but may also lead to breathtaking profits. If this process of monitoring cannot be done due to time or knowledge restrictions, one must hire the services of a financial planner.

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By now the question must be if anything at all could save your portfolios from inevitable stock market crashes. A little research would provide you with enough optimism. Stock market crashes have several reasons such as unexpected inflation, deflation, declining economic growth, a geopolitical crisis or a shock to the financial markets. Thus, in order your protect portfolio, one must invest in bonds, REIT (Real estate Investment Trusts) and TIPS (Treasury Inflation Protected Securities).

Before we sum it up, I shall take the privilege to remind you of why God created Stock Market analysis. It is indeed to make the Weather Forecasters look good. Nevertheless, the moral of the story is that one must never forget the fact that there exists no sure-shot formula for investing. At the end of the day, it’s all a matter of luck and probabilities. The only differentiating merit being the chance of risk-elimination.

 

 

Picture Credits- Google images
By S. Shahid Abdul Majeed

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