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Secrets of successful investors:
Indian stock markets once again ended on negative note on account of global and domestic slow down in the economy. Many new investors took oath not to invest in stocks after burning their fingers in Reliance Power IPO. Why some investors always make money while others fail in the markets.
1. Herd mentality: They sell their holding when others are buying. These investors sold their stocks when herds were buying at 20,000 levels in January. Successful investors will never follow herds and go against tide.
2. Work hard: One should systematically work hard on research if you want to make money in stock markets. It is surprising to find that even intelligent people with good analysing capabilities will invest in stock markets just basing on broker’s tips. Successful investors will never put their money without enough research.
3. Fundamentals: If you are an investor, it is better to focus on fundamentals. Technicals are for traders. If you invest in a good company with sound fundamentals with reasonable valuations, you will never lose money in long term. Never buy penny stocks.
4. Volatile growth stocks: These stocks with very high beta give exceptional returns in bull markets but may give sleepless nights in the current situation. Diversify your portfolio. Successful investors will never put all their money in one stock or one sector.
5. Initial obstacles: All great investors lost money in their initial days including Warren Buffett. You should ready to face losses in the initial investment days. Go slow initially and learn from losses. Many new investors who lost their money in the Reliance Power IPO will never return to market for another 3-4 years or when Sensex makes new highs and once again burn their fingers. Stay cool in the crisis.
6. Greed and fear: These two characters are biggest enemies for every investor. Unless you overcome them, you will never become a successful investor.
7. Go long: Day traders will never beat long term investors in the earnings. Stay away from day trading. Never put you money in speculative stocks and Z,S and T group stocks.
8. No sentiments: Don’t become sentimental with your stocks. Successful investors sell their stocks when they reach target. There should be specific reason to hold your stock even after it attains your target price.