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Sunday, May 5, 2013

20 must-follow Stock Investing tips for newbies

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Greetings from LiveBombayStockExchange, your one stop website for Stock market tips and reports.

Stock market investment is seen as a very difficult frontier to capture by newbies who doesnot understand Stock markets and how they function ie. people who lag basic knowlegde, understanding of stock markets. However investing in stock markets or any other form of putting in your money is not a very difficult art to understand. In this post I would go-through 20 best investment tips ahich a newbie should know before investing in Stocks.

20 best investment tips for newbies

1. It's a long-term game: Those who deal with intraday trading have meager chances of making big time money, billionaires like Warren Buffett have been made from investing and holding stock over their lifetime

2. Hate Complexity in investment: Keep your investments simple and logically correct. Those who trade too often, focus on irrelevant data points, or try to predict the unpredictable are likely to encounter some unpleasant surprises when investing. By keeping it simple--focusing on companies with economic moats, requiring a margin of safety when buying, and investing with a long-term horizon--you can greatly enhance your odds of success.

3. Overnight riches are fictional: One can never become rich overnight by investing in stocks, thinking about same is sheer wastage of time and money and mind too!!

4. Turn off your TV: Now a days lots of paid business channels run by intraday trading brokers misguides newbies with their stock options, mind your brain instead as last year top Indian investor Rakesh jhunjhunwala have lost money in midcaps whereas the index has gained in the same period, DONT FOLLOW PAID MEDIA BLINDLESSLY

5. You are owner of stock:Dont think simply as a investor in company but rather think as a owner of the company, this strategy would help while choosing the stock to invest in because as an owner you would never speculate and would invest only in companies with strong basics and bottomline.

6. Sell Higher:Always sell your investment at higher price then purchase price. When stocks have fallen, they are low, and that is generally the time to buy. Similarly, when they have skyrocketed, they are high, and that is generally the time to sell. Don't let fear (when stocks have fallen) or greed (when stocks have risen) take over your decision making.

7. Past stock trends continue: In stock market investments one should always remember that past stock trends always continue and if the stock has fallen miserably in past and risen then it would definitely repeat the same in future thus donot panic if the investment is going down daily.

8. Invest in good managed company: Management of a company should be good and one should consider the management profile/qualities while investing as they are the ones who are responsible for increasing market cap of a company. DONOT INVEST YOUR MONEY IN BADLY MANAGED COMPANY

9. Economy is the king:Always remember that economy is the king as good management might feel helpless when countries economy is on a decline.

10. Watch when you buy: Stocks are priced and eventually weighed on the estimated value of future cash flows businesses will produce. Focus on this. If you focus on what you paid for a stock, you are focused on an irrelevant data point from the past. Be careful where you place your money.

11. Omit word 'stubborn' from you: Stock market investment is all about patience and there is no room for stubborns in it. One should follow the company and not the stock price of it. If a stock you recently bought has fallen, but nothing has changed with the company, patience will likely pay off. However, if you find yourself constantly discounting bad news or downplaying the importance of deteriorating financials, you might be crossing that fine line into stubborn territory. Being stubborn in investing can be expensive.

12. Give room to surprises:The first big positive surprise from a company is unlikely to be the last. and so is a negative surprise, so dont get too much bothered about such surprises.

13. Gut feeling answers it all: Any valuation model you may create for a company is only as good as the assumptions about the future that are put into it. So your gut feeling about a company is must while making an investment

14. Know the management correctly: Always know about mutual funds own the company, and what is the record of those fund managers, If they have a bad past history then surely your investment is at loosing side.

15. Stocks move faster then you normally do: Most deteriorating businesses will do so faster than you anticipate. Be very wary of value traps, or companies that look cheap but are generating little or no economic value. On the other hand, strong businesses with solid competitive advantages will often exceed your expectations. Have a very wide margin of safety with a troubled business, but do not be afraid to have a much smaller margin of safety for a wonderful business with a shareholder-friendly management team.

16. Maintain safety margin:Always invest in stock market with your surplus money, never invest more then you can sustain as that would adversely affect in bad times. follow the hindi proverb "Chadr dekhkar paer pasarna"

17. Think on your own: Always remember that in stock market one has to be his own stock analyst and should never follow any stock guru blindly because these guru's are the ones who make the biggest investment mistakes.

18. Buy value stocks: The shopping idea of "value for money buying" is also applicable in stock market investing, never purchase a overpriced stock and never let go a undervalued stock

19. Avoid speculations: A newbie should never purchase stock by just following the mob as in majority of such cases the downturn of these stocks arrive shortly

20. Buy Quality stocks: One should always buy quality stocks, Qualtiy stocks are the one which have good management, good bottomline, evergreen sector etc

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