Stock investment decision making

Investing in stocks is a saving game. In order to play each game, you must know and follow the prescribed rules and regulations. Any violation means that you are penalized. The sanction is proportional to the seriousness of the infractions of the rules.

Just as navigation is easy through the calm waters of the sea, in addition to the extensive knowledge you have about investing in shares, the main condition is that you have to face the issues related to buying and selling with a calm mind. Let it be fully understood that your emotions play no role when it comes to trading volatility. Even in the normal market, they have no role. When you are not in the right frame of mind, you make the business decision at the worst possible times.

Fear and greed combined with emotions is a bad scenario that an investor can create for himself.

Some of the points to consider before trading stocks are:

1. For starters, don’t get carried away by the killer instinct. Watch for modest returns.

2. Take the traditional tactic of long-term returns. Invest the same amount of money at regular intervals and buy in small lots. Naturally, you will buy more shares when prices are low and fewer when they are high.

3. Take advantage of the services of a broker. Before you hire him, meet him face-to-face in his office. Have a preliminary discussion about his financial goals. Get a copy of the company’s commission schedule. Determine what kind of services you need from the broker. You may need recommendations, research reports, and investment advice.

4. Once you zero in on hiring a particular broker, provide the correct information about your goals, personal finances, net worth, and your previous investment experience. This will allow the broker to make the appropriate decisions for you.

5. Now you come to the center point. Who will control decision making for your operations? You must specifically give in writing that the broker is the decision-making authority, if that arrangement is in your best interest. Once that authority is vested in the broker, the broker will make decisions without consulting you. Those decisions will be in your best interest under the prevailing conditions. Whether you make a loss or a profit on a particular trade is none of the broker’s business. Discretion, therefore, should be granted after very careful consideration when you are fully convinced of the broker’s ability and track record of success.

6. Never invest in a stock you don’t know about and avoid guesswork. Know the basic financial terminology and the fundamentals of investment.

7. You invest to make a profit, not to lose money. At the same time, you should know that stock investments are always associated with some degree of risk.

8. A company’s past performance does not guarantee future success. Don’t make hasty investment decisions based on the intensity of the seller’s appeal. He is doing his job, you please do yours!

9. Beware of catchy phrases often used in stock trading, such as “insider information,” “confidential leak,” “an acquisition is in the offing,” “a dynamic product,” etc. Your money can never be doubled in six months as promised by many!

10. Do your best to limit transactions. The more transactions, the more commission you will pay.

11. Don’t focus on a single product. Let your portfolio take care of different industry segments.

12. Broadly speaking, there are four types of investment strategies: fundamental approach, psychological approach, academic approach, and eclectic approach. Each approach requires a detailed study. Keep your knowledge up to date on these strategies and you may need to change your strategies based on market conditions and volatility.

You will evolve as a good investor gradually through your experience and theoretical knowledge. Both are important. Never lose focus and stray off tracks while investing. Years of hard work and profits can be wiped out with one wrong trade.