Investing is serious business. You should
take it seriously. After all market
favour the intelligent.
Do’s
Invest
in Knowledge:
Read the financial
dailies and magazines, Research Reports, Surf the Internet and watch Business
channel like CNBC etc. You have to take financial decision. Decision without
support of knowledge are likely to
collapse. First built the foundation of knowledge and then start the stock
market investment.
Control over your Emotions:-
Before mastering the
market, master over yourself. Fear, Greed, enthusiasm are dangerous for the
stock market investors, Only Patience is a great tool that will pay you the
return. Sometimes you invest in the shares of the company and there is a news
that the company has been banned from the operations. Don’t panic, if you had
understood the company well before investing you will know that the company
will put everything to lift the ban on its operations. It may be a short term
phenomena.
Don’t Commit Suicide ,Take control of your Trading Account:
Most of the persons leave
their trading account with their brokers. They trade but only their broker knows whether
they are in gain or loss after deducting the
brokerage fees, income tax, security transaction tax, bank charges etc. Investor demand stock statement at the
end of the year only when they had to file their income tax returns . It is
just like committing suicide.
You may have made the
gain from the stock you buy and sell but without considering the brokerage
fees, income tax, security transaction tax, bank charges that you have to
paying for every stock.
If you are investing and
Trading you have to maintain the exact record of your trading in excel on daily basis with following column:-
1. Name of the company
2. No of stock bought,
3. Date of buying ,
4. Buying price of the stock
5. Expenses incurred in
buying,
6. Date of sale,
7. Units sold ,
8. Selling Price of the
Stock
9. Expenses incurred in
selling
10. Net gain or loss.
“ If I had maintained the stock records on my own , I would
have left the stock market early” said Investor withdrawing from the stock market
after 12 years with huge losses.
Look the non Financial Data first:
·
Management of the Company ,their education qualification and
experience.
· Contingent liabilities (given in the Notes to accounts and
Auditors report in the Balance Sheet). These figures are not reported in the balance sheet but they have the huge
impact if these liabilities come into reality. E.g huge liability the company
had to pay if it lost court case against the competitor.
A company might have a low P/E, high
growth rate, good asset backing, but if it is not traded regularly on the
exchange, then it is very tough for you to dispose it at a fair value at any
given point of time.
Dividends
If a company pays dividend regularly, it is a sign
that it has a good balance sheet. Check the dividend history over the last five
years.
Don’ts
Don’t Invest Everything in Stock Market
I know many of
my friends who had withdrawn their savings, Fixed Deposits, Provident funds and invested in the stock market and now after
12 years of operation in stock market have come out from stock market without
any retirement planning,
Don’t Look for Investment only through
Initial Public Offer.
Companies just getting listed are more
risky than established blue-chips. Ideal investment means invest in the
companies that are part of Market index.
Don’t
rely entirely on Broker
“You
can not see the heaven if you don’t die” Broker
can assist you but can not replace you. Use him as a tool to achieve your goal .
After
every buy and sell transaction check your contract note. It should have the
order number, trade number, trade time, quantity, price and brokerage, and
should be signed by the authorised persons. If you have all your
documents in one place, it is easy for you to spot fraud and take action
against it. If you are applying for an IPO, keep a copy of your application
form and cheque. Your documents will save your money and your life. Don’t
underestimate the power of recordkeeping although it may be burdensome but it
is worthwhile.
If you have an online
broker, check your depository participant status. Shares must reach you on the
second day after you have put in your buy order and cash must be in your
account the second day after you sell.
Keep a daily check on
your DP account even if you have not transacted. Sometimes brokers move your
shares to their common pool and transact on them. Call them and ensure that
they reverse this. If a record date for dividend payment has been set on the
day your broker does this, you may lose the dividends.
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