Market has given me many lessons. It tells me to set aside my ego. Never get married to your stocks. Whenever you are going to buy a stock , make a clear mindset about it. Is it for investing or trading. Never jump between these two based on stock price movement.#marketstrategy
When you have bought a stock for trading based on technicals or your any strategy, always have a stoploss based on that strategy. Most important thing is to respect stoploss and humbly accept loss. You can't be right everytime.
If you respect stoploss, there are very high chances that you will end up making money overall (considering you have done your homework). If your success ratio is 33% then also you can be on profitable side. Lose less by respecting stoploss and make big on positive bets.
Don't believe, check the accuracy ratio of world's best trader and how much trades he took in his lifetime. You will understand the importance of discipline in trading.
If you are buying a stock for long term, do a proper homework. Annual reports, management commentary and concalls are the best material to understand a company and best things is, it is all for free.
If your long term stock price goes down by 50% and you start panicking , don't call yourself an investor. Always ponder upon why you bought stock in the first place. If those things are still intact, then why fear? Personally , I love corrections. I can buy more. :)
Even after you have done complete homework on your investment bet, you may end up on losing side because let's face it, insiders know much more and many scams go in 'company' which even your hard work can't catch. Even RJ and Warren Buffet have failed few times.
Never be over-invested in a single stock. It takes away your peace of mind. We are human beings and subject to emotions. If you are over-invested you will get restless if stock goes down abruptly. Greed kills everything.
A combination of fundamental and technical knowledge can do wonders to your investment. You will know when to book partial profits and when to add more depending upon technicals even in your long term picks. #Bajajfinance is the latest example I can cite.
Never ever invest in a stock/business you don't understand, no matter how lucrative that sounds. Borrowed conviction is dangerous. Never chase the 'talk of the town'. Try to grab it when it is unknown and then enjoy profits when it becomes popular.
Patience and knowledge will take you a long way in market. Emotions will lower your returns. If any of your friend's or analyst's or talk of the town is hitting daily upper circuits, don't feel bad. If you hold good stocks, your time will come too.
You can not hold every good business in your portfolio. Over-diversifying is not good. Always have only that number of stocks in your portfolio that you can manage. It depends upon individual. Some can handle 20. Some can handle 10. Pick the best of your picks and invest.
'Buy and forget' doesn't work these days. You have to be updated about the developments happening in the business you hold. Never be rigid in selling if something sounds fishy.
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