Protect Yourself from Bad Stock Advice

Protect Yourself from Bad Stock Market Advice

Scams, breakdown of governance, rising prices, inflation, slowing foreign direct investments, rising interest rates, commodity prices and crude oil are some of the threats that are key obstacles in India's growth. Listed here are some of the investment advices related to stock markets which should be given proper thought before betting your money on them.

Markets are not doing that great so it's not a good time to invest

In fact, this is what an experienced investor would be saying right now: I am getting great deals on the stocks of my choice so why not buy them now with a medium to long term horizon as the prices are expected to go up when markets go up. In fact, this is what experienced investors did in last rally.

If the company in which you are planning to invest is fundamentally strong then one should invest bearing in mind medium to long-term view. Also in a falling market, one should be happy as you are gathering more number of units and when the markets rise they immediately start showing profits.

Do always remember that to enter stock markets only if you are a long-term investor with a capacity to hold.

My investment in this company is a sure shot profit

I am sure most of you have burned your fingers by investing your capital on 'Tips'. And always know the general outlook of the economy. If the advice has come from a self-proclaimed expert neighbor or friend then please be extra careful before jumping in. Also fix a downside on your investments and set strict stop losses. This will surely minimize your losses from stocks.

I made Rs 10,000 today in the stock market and so can you

And your eyes pop out. You would also want to join the gang and make some easy money. What you need to check with them is 'Is the value just on paper or is it actual realized profit?' In fact, there are certain stocks which are fundamentally so strong that investors holding on for the long term reap huge profits even to the tune of 200 percent or more.

I am not exaggerated by the current fall in the markets because I have a well-diversified portfolio

Diversification of a portfolio means diversification in different asset classes. Also, over diversification in one asset class is not good. Even if you have a limited number of stocks but if all stocks are of the same sector then too your purpose is not served. Diversification is suitable asset allocation of your portfolio in different asset classes based on your goals.

You need to be an active trader to beat the markets 

Active trading can prove itself expensive because every transaction costs taxes. Also at times just the urge to trade can have you end up making losses. Many a times the portfolio manager just to earn more commission can be mismanaging the portfolio. For active trading you need to watch the markets on a daily basis and follow them with technical and fundamental expertise which not all of us have.

This way you are taking part in the market but at the same time restricting your cost and losses. Also, remember that for investors who invest in equity mutual funds, it is not advisable to buy or sell funds like one would do with stocks since it can be very expensive as well as not worth the efforts.

Remember in stock markets listen to everyone but follow expert’s opinion with your own research and be in for the long term investment strategy.