According to the famous equity market investor Peter Lynch, the key to making money in stocks is not to get scared out of them. If you are new to equity trading or think that equity market is not your cup of tea, read on to discover six rules for investing smartly in the equity market!
1. Don’t buy stocks just because someone you know has recommended it! Before buying a stock, conduct preliminary research about the stock and the company. Read the financial statements and find out about the business, promoters and management.
2. Understand you risk tolerance level or how much risk you can take? Make investment in equity market based on your risk capacity.
3. Don’t wait for a correction to enter the market. More money is lost is waiting for market corrections to happen than in market corrections.
4. Do not panic when the equity market falls. Equity markets follow a cyclical trend and are influenced by many factors. The fundamentals and future prospects of the company do not change just because market undergoes a correction.
5. Be disciplined in equity trading. Create individual stop loss levels for all your equity investments based on the volatility of the stock. When the stop loss levels are hit, sell the stock instead of averaging it out at lower levels.
6. Don’t keep dud stocks in your portfolio in the hope that they will go up one day. Cut your losses and move ahead. Invest in some other stocks which will give you a better return in the same time frame.
Stick to these rules and invest smartly in the equity market!
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