Thursday 26 April 2012

20 things you should not do in Stock Market

Based on varies studies and experience, these are a collection of 20 things you should not do in Stock Market:
  1.  Do not invest unless you do not know. [Peter Lynch] 
  2. Do not invest money, you may required in next 3 to 5 years.
  3.  Do not watch your portfolio daily or weakly. 
  4. Do not influence your investment decision by current quarter or half yearly results.
  5.  Do not invest in Initial Public Offer (IPO). There are thousands of company you can know better in secondary market. 
  6.  Do not invest even for 10 minutes if you can not stay invested for 10 years. [Buffet]
  7.  Do not believe in rumors, tips, future earning prediction by Bloomberg or CNN IBN. 
  8.  Do not put all the money allocated for a company on single day. Make it in six trench and invest at fix date of every month. 
  9.  Do not compare your company performance with overall market behavior. Your crop may not be ready when others are harvesting. 
  10.  Do not allocate more than 25% of net investment in a single company. 
  11.  Do not invest in more number of company than you can track. [Peter Lynch]
  12.  Do not invest in a company having market capital below Rs. 10,000 Crore.
  13.  Do not invest in a company having debt to equity ratio more than 0.5.
  14.  Do not invest in a company having average PE more than 25 over last 7 years.
  15.  Do not invest in emerging or technology business. Invest in a well established sector and companies giving technology services. 
  16.  Do not buy or sell on regular basis. Be as lethargic and lazy as you can. It is hardest part for any investor. 
  17.  Do not put unrealistic targets. Your investment goal should be 15-25% return yearly. Upper bound comes only with time and experience.
  18.  Do not watch 'Stock T20' or '6 stock for today' on TV. 
  19. Do not be overdependent on statistical data such as PE, PEG, CAGR and profit margins. Be imaginative and socialistic.
  20.  Do not put more money on loosing bets. Lets it give you some profit and prove its worthiness.

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