Share
market in the long term is known to surpass any other asset class in terms
of the profits that can be made. However no doubt that this is one of the
riskiest method of making money.
Never invest all your money in equities:
Never invest the money you have saved for
your daughters marriage which may be coming up in the next one and half years because someone said that in one and half years, you can
double that money in equities.
In one and a
half years it could as well become half the value of the capital. Hence keep apart
an amount for investing into the equity market. That should never be money
that you need for an emergency or other important matters.
Money that you
have kept aside for equity investment must be purely an amount that can be
forgotten for a longer period of time because making money in the market
does not happen overnight.
Major
crashes are opportunities to buy:
Normally when there
is a sale in the supermarket, people run to buy as much as they can as they
are getting it cheap. However when there is a stock market
crash and when your favourite companies shares are available at rock bottom
prices (assuming nothing has affected companies business prospects), that's
the best time to buy them in fact. Normally when everything is positive and
the market is in an uptrend, people go and buy and when it has crashed,
people sell their stocks and run for cover. Opposite is the strategy to adopt.
Greedy when others are fearful, fearful when others are greedy.
This is one of
the principles experts proclaim. That's when others are fearful (a time when
market is down), get greedy because you get shares cheap. As mentioned
previously, generally when
shares are climbing up and SENSEX conquering new highs, all flock to buy.
However When the shares are climbing down and the market is crashing people
sell and run for cover.
Only thing you
should try to ensure in such circumstances is that crash is total and that
you have seen the bottom. It is however difficult to ensure this. However when
your favourite share is available at good prices even if it is not the
lowest possible, that's good buy.
Next:
Buy Low, Sell High
