GOLDEN RULES IN STOCK MARKET INVESTING
1. In stock market only few can make money and most will lose. (more particularly traders).
2. Stock market requires continuous supply of naive investors, otherwise it will collapse.
3. Share prices of most companies, in one way or the other, are manipulated.
4. In most cases, value is created only for Promoters and their group and not for minority investors.
5. It’s always the retail investors who are hard hit since neither they have staying power nor privy to any privileged information. By the time they buy the ticket, the train would have already left the station.
6. Rating warnings are provided, in most cases, after the disaster has taken place, leaving no opportunity for investors to safeguard their investments.
7. Stock brokers are always bullish on market, for obvious reasons.
8. Stock recommendations, research reports some time are given with malafide intentions.
9. Whether the investors make money or not, the promoters and all market intermediaries make money. That includes Stock Exchanges, Brokers community, Registrars, Custodians, Rating agencies, analysts, Regulators and the Media – both print and electronic.
10. Markets move up or move down, in no knowable pattern from year to year. But over the course of a lifetime, which has been tracked by a research firm for almost 90 years, the finding was, big-company stocks have returned just fewer than 10% annualized. Always keep this in mind.
11. Many investors pull out at the worst possible time, the bottom. Making money in the stock market is hard not because finding great companies are difficult but because the best and easiest-to-understand strategy for winning is so difficult to adhere to. One should know when to enter and when to exit.
12. When times are good, many may find tempted to borrow against the value of the stocks to buy even more stocks. The practice is enticing because returns are amplified if the stock price goes up, because one is reaping the profits from stocks, otherwise couldn't afford. Even investors with a few thousand rupees in their portfolios can qualify to borrow in this manner at some brokerage houses, through margin trading. Margin trading, at times, could force the investors to sell quality stocks at a bad time. Keep away from excessive speculation.