You can easily relate this article to the books that we often come across at every next book store. “Rich Dad Poor Dad”, “Beating the Street”, “The intelligent Investor” etc are few of the famous books that gives you tips on how to save and increase your money inflow by investing at the right place and time.
During the times of fluctuations in the stock markets we usually come across a lot of conflicting opinions by the experts on TV, our neighbors and many more. Risk has always played a vital role in investments and therefore it is easier to talk about risk when the stock markets are reaching the heights. Thus, when the prices of shares held by normal investors fall with each passing day, then it becomes very difficult to make up your mind take the right decisions.
The following are some pointers that need to be considered about before you take any risk.
- The first thing that any investor needs to do is to avoid the temptations of the ups and downs in the market. A lot of us who invest frequently have a thought process that you cannot make money or create wealth if you are not able to invest at the right timing of the market. Investors are usually allocated with excessive levels of money to be invested into a particular product to book profits. Now the question that comes in everybody’s mind is; what happens to the booked profit or what the investor does with the booked profit. In case if it is reinvested, then all that is being done is the adjustment of the amount which is previously invested and actually the reality is nothing more than the revision of invested amount. Comparatively, saving money in a bank is re balancing. Hence, it is important to calculate and consider the account with all the available choices, instead of making diplomatic choices. The decisions regarding the financial investments should be aligned with your goals and not with the market behavior.
- The second thing to keep in mind is to always be conscious before taking any decision. Avoid getting influenced by buying in excitement or panic sales at trading counters. Traders can earn their money by taking short-term moves, margin payments and incurring interest charges on open positions. Whenever there is drop in the prices, cash for margin is difficult to find when getting beaten in an open market. This is the reason why investors quickly sell and are enveloped in panic during a market crash. Do not think of yourself to be in a position which may not be a reality for you in future. You are not investing burrowed money, but it’s your hard earned money.
- The third important thing to remember is to never try to catch a sharp object. It means try to avoid risks as much as possible. There are hi-tech systems available in the professional market where investors use them to track their expected and gained profits and the current positions. They have to work out on complex schemes that assist them in competing in a hard and tough market. Normal investors should try to avoid the risks related to the markets and continue to save for their future goals in life.
- Do not forget the fact that a falling tide can take everything along with its stir. Recently the market has seen a drop in the value of non-banking shares due to the fear of defaults and downgrades across the financial sector. It can also be concluded that the stock values are getting reworked by the markets as per new available information. However, this does not offer an immediate chance to buy, but the temptation to buy good shares at lower prices is always there. Though, it is not possible to turn a bad balance sheet in good books over a short period of time. Therefore, it is advised to avoid selling or buying stocks in hurry.
- It is always important to keep on looking for the clues. After the fuss created in the market and a real strategy to correct the defaults of big companies is designed, is the time when the actual process starts for the recovery. Therefore, there is no need for the normal investors to look for the long-term gains to make decisions preemptively.
- It is important to have a detailed and careful evaluation of all the information before hand. If any continuous steep fall is seen in last few months in the value of your stocks then the price correction or the recovery cannot occur even with the discovery of new, good news as compared to the losses booked by you. Quality has always been a key aspect of stocks that one needs to understand with the utmost priority in a risk-laden market. Avoid keeping the junk shares and understanding your errors can help to take necessary action to make it right.
- People who have a sudden inflow of a large sum of money either by retirement funds or the sale of real estate, etc., should hold onto that cash. During the tense times and risk in the market, it is important to hold funds in the cash form. Once you are clear with the market, you can start the investment process. Never get pushed due to any influence into making an investment decision. During the risky situations of the market, the best investment plan is to invest a little amount or even nothing at all.
- The regular investors who are constantly investing big/small amounts of cash as monthly investments in SIPs or mutual funds should know that their financial strategy is sound. The value of the portfolio of your mutual funds might drop and will be difficult to bear market situation, but this should not be a cause of concern if you’re financial and investment goals are long-term. It is advised that investors should not discontinue investing via Systematic Investment Plan (SIP) into mutual funds even during tough market.
- The investors whose financial goals are short term but are confused with the investment in equity for earning some quick profits need to realize that this might bring in bad luck. Such situations are quite common with investments that offer better than average returns in a very short period of time as they carry an inherent risk. It can also be said that simple and boring is not a bad idea of investment.