February 01, 2007

Thumbs Rules For Stock Market

Investigate before you invest and not vice versa. Buy companies doing business that you understand. In times of panic, be greedy and buy good companies. Control your emotions -- greed and fear. Be honest with yourself -- book a loss if you think you have gone wrong. Avoid momentum investing.

Do not fall prey to herd mentality and take tips with a pinch of salt. Buy more of a stock if it falls, provided you have confidence in the company. Don't gamble -- no day-trading, no leveraged deals and no loan against shares.

Follow your stocks periodically and see that all conditions (such as entry barriers and basic investment ingredients) continue to be in place. Hold a company (stock investment) for 3-5 years. Always look for bargains Look for businesses that are in potential growth areas. Avoid companies that are in a dying business segment, even if they offer value. Invest in businesses which have a sustainable competitive advantage.

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