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How To Avoid Losing Money in Equities

Aug-16-2019Blog by – Mr. Dhruv AjmeraRead Time: 4 Min.Word Count: 799117How To Avoid Losing Money in Equities
Investing in equity is not an easy job. You need to careful with your hard earned money. Read more on how to avoid losing money in equities.
While equity markets offer enormous investment opportunities, the prospects of enduring heavy stock market losses always tend to linger around. This is particularly true for individual investor who can find the wavelike patterns in stock prices and the generally volatile nature of the broad markets unnerving.  However, keep in mind that stock markets move in phases. It goes up during one phase and comes down during another, depending upon a combination of factors and even the best online trader can find himself or herself in a tough and testing position in certain times. This very nature of the markets therefore makes it essential that an investor should be to try and to minimize the losses.  By following some simple and effective rules, one can ensure to avoid making heavy losses in stock markets.

Here are a few useful guidelines to help you become a disciplinedinvestor.

1.    Observe the primary market trend: As an astute investor in financial markets, it is important to segregate between the various trends and learning to adapt to them in the right manner. Primary trends indicate the basic direction prices are onto and are largely driven by a combination of fundamental factors like economic growth and corporate performance. Secondary trends are normally corrections in the primary trend and as such will not affect the long term investors much.

2.    Underscore time periods for investments: Please remember that a few days or few weeks is normally a very short a period for equity market investing. This is because short term market fluctuations can make a very well initiated stock purchase look depressing and could lead to untimely exit from the market. This will accentuate your losses in equity markets in spite of the hard work put into the investing process.

3.    Keep a check on political space: Normally, a thriving economy entails a sustained period of political stability and general well-being in the normal course of businesses. A stable government can bring in the much needed economic and business reforms with ease and also plays a larger role in keeping investor sentiments on a high. This spurs corporate earnings and leads to a general gain in stock markets. Investors need to keep a close watch on the general trends in political space and try to underline major changes which could affect their portfolio in the larger context.

4.    Do not be in a rush to book profits: The best online traders would always cut losses and let profits run.  Cutting losses means closing a trade soon after it enters into loss while letting profits run is ensuring that a position in profit is carried forward till a meaningful price target is achieved.  This basically means that traders must learn to resist the tendency to sell winning positions too early.

5.    Watch corporate earnings growth: Remember that stock prices are primarily a direct function of a company’s profitability and markets would always salute corporate earnings even if the overall mood is choppy. Do not make the mistake of an unwarranted and untimely withdrawal from a stock when the initial reaction to strong earnings growth is distorted. Look for the reasons elsewhere and be committed to your trades. When the markets witness calm, such a trade backed up by strength in corporate earnings will deliver sound returns.

6.    Learn not to panic: Most of the losses in equity markets are made when the investors are in a state of panic. One brilliant approach to fixing this is investing via the mutual funds. Get hold of a good mutual funds advisor who will map out a plan for your investment in stock markets and would also ensure that you have a well spread out and diversified portfolio of funds which will help you meet investment goals in an efficient manner.

7.    Face realities and avoid confusion: Refrain from discussing your investments and their current state of affairs with lot of people as a plethora of opinions and thinking patterns would only lead to confusion and chaos. This can unnecessarily clutter your concise with things which otherwise should be overlooked and can trigger some easily avoidable stock market losses.

Conclusion:

While avoiding mistakes altogether while investing is nearly impossible, a well thought out and researched plan can help you avoid heavy losses in equity markets. A good investment advisor would help a lot in this regard.  Remember that markets are driven by emotions and by very nature, extremely volatile. Keep in mind that every investment or trade is an opportunity to learn and enhance skills as markets are constantly on the move and every day there would be new opportunities to create wealth.

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