Dos and don'ts of stock market investing

Most of us have our own perception of investing in the stock market based on our experiences, but also tend to be confused with the opinions given by others. Knowing the dos and don'ts of investing in the stock market would help you become a smart investor.

The dos and don'ts in the stock market are:

1. Slow, steady and boring wins the race

It is best not to panic over information about stocks in the media. Being slow and steady about the activities that your money is to be used for would ensure that you invest in ventures that are good, useful and profitable.

Reading good books on personal finance will help you in taking right financial and investment decision. In addition, finding good financial advisors would help you get advice regarding stocks and mutual funds, along with entrusting the custody and management of your funds to them.

All this may seem too boring and time consuming, but it is better to be cautious than bitten too hard.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Founder and Director of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can be reached at ramalingam@holisticinvestment.in.

All opinion -- pro and con -- is already built into the price of equities today.

Market forecasts on the media has got good entertainment value but doesn't have any investment value. It is just enough for long-term investors to invest in good stocks, and mutual funds that would appreciate in the long run.

It is best to understand that market forecasts only show you the expected direction in which the market is heading based on the available information. This forecast is only a forecast and need not become reality.

In addition, market fluctuations are the very nature of share markets and should mean nothing to long tem investors. Making accurate market forecasts is tough as they are influenced by various factors like the outcome of political elections, the direction of the economy, interest rates and world events. It is also wise to know that these fluctuations are incorporated in the price of the share, stock or mutual fund.

It is unadvisable to place your full faith on analysis of others regarding stock, shares and mutual funds. No wise man or woman would always tell you all about his/her market beating strategy. Making ones own analysis, keeping your financial goals in view, and framing a strategy always helps.

This involves studying the performance of top performing stocks and mutual funds over five years and existing mutual funds over a period of three months to decide on which stock to maintain and which to dispose off. All this would ensure that you are investment smart.

As a long- term investor you should never contemplate taking advantage of short-term market dealings and speculations. Playing with shares and mutual funds in the short-term market may give you a profit in a few transactions but will not give you profits forever.

So you can't have an investment strategy which gives profit inconsistently. You need a strategy that can bring profits consistently so as to be a successful investor in the long run.

It is true that playing in the share market is neither entertainment nor fun. It is also futile to borrow or work on short-term margins to make money.

Stock tips are good to learn, but not to act on for speculations. It could prove dangerous to act on speculation tips given by one and all, as they may not be correct. In addition, everyone has his or her own perception of investment.

You need to take time to think over each tip and analyse if it contributes to your long-term objective of capital appreciation. Similarly it is not advisable to subject your money to risk with investing in investment fads that may or may not earn you huge profits.

The final advice

You need to make a calculated decision considering the pros and cons whenever you make an investment. In addition abstain from trading often in the stock and mutual funds market. Always think in terms of long term investing.