Everyone has a financial target of making more money in a shorter amount of time. A individual who only has a small amount of money wants to get rich quickly. The need to make a large sum of money overnight has enticed the majority of people to invest in the stock market. A number of investors have made a fortune in the stock market. As a result, every stock market investor dreams of making a fortune one day. Investing in the stock market, on the other hand, is not a simple process. The number of investors who have lost money in the stock market outnumber those who have made money.
Many investors in Nepal have lost a significant amount of money as a result of the market collapse over the last three and a half years. The ongoing instability in the Nepalese rupee has put Nepalese investors in a tizzy. Several investors are considering permanently exiting the stock market. It is important to obey those guidelines in order to stay active and competitive in the stock market. The following are the five big Golden Rules for success in the stock market:
Get to know yourself
This will seem silly, but not everyone knows who they are. People’s perceptions of their own strengths and shortcomings are skewed or prejudiced. They imagine themselves to be nobler, smarter, more creative, active, social, and stronger than they are. They, on the other hand, are prone to underestimating their own shortcomings and flaws. People do not have an accurate assessment of themselves as a result of this.
Knowing yourself entails comprehending your personality. It entails a realistic assessment of your strengths as well as your flaws. You’ll know what to expect from your choices and actions if you understand your strengths and weaknesses. Depending on their personality, a stock market participant may be a trader or a long-term investor.
A trader is best suited to someone who is extremely active and demands immediate results. Similarly, if a more passive individual accepts himself as a long-term investor, he will gain more. Things go wrong when a passive person attempts to trade, or when an active or impatient person tries to be a long-term investor. Understanding your nature, accepting it, and tailoring your investment strategies to suit your nature, not the other way around, are important.
Be aware of your investments
You must understand your investments in order to be profitable in the stock market. Investors should have a clear understanding of their potential investment before making a decision. Before investing your money, you should do enough homework or study. Doing your analysis is critical to investment success, whether you are a fundamentalist or a technical analyst. Investors can have different analysis styles, but it is needed if you want to invest in the stock market.
Do you buy your clothes without first inspecting them? The response is most likely no. You pick the right color, design, and fabrics for the job. You put it on and decide if it’s right for you. You start looking at other options for clothing. If any of them appeal to you, you can haggle over the price. Finally, you make the buying decision if you find the clothes you want the most at a price you think is reasonable.
You spend a lot of time looking for clothes that are relatively inexpensive in comparison to the stocks you purchase. Then how can you justify buying a company’s stock without doing some research on it? You can at the very least follow the instructions when buying stocks, just as you would when buying clothing.
Don’t go along with the crowd
The flow of crowd psychology affects stock prices. The stock market rises to new highs every day when the crowd is relaxed and intoxicated. The market, on the other hand, plummets when the crowd is fearful and depressed. Since the market is influenced by the crowd, following the crowd can be risky for your investment success. If you want to win, you have to stay one step ahead of the competition.
As an example, consider the movement of Shivam Cements Limited’s (SHIVM) stock price. Investor sentiment towards Shivam Cements was negative when the stock was trading between Rs. 310 and Rs. 350. On social media, investors were making critical comments and urging others to sell their stocks. As a result, the stock price has been steadily falling. As Shivam’s stock price began to increase, reaching Rs. 680-700, there was a massive transaction of Shivam shares, with positive reviews on social media.
If you join the crowd, you would most likely fall behind because the crowd responds slowly, as shown by Shivam Cements. There was a general sentiment to sell Shivam Cements shares when they were worth buying. Similarly, when a stock’s price has doubled in a month, the general consensus appears to be rapid purchasing. This can lead to a trap for investors. To be effective in the stock market, one must adopt a contrarian mindset and act prudently (most of the time in opposite to the crowd).
Do not spend your money based on rumors or tips from others
It’s all yours now. Why should you waste your time listening to gossip and worthless advice from others? This is as straightforward as it gets. Your investment decision should be focused on your own analysis or homework. How can you be sure that the free advice you get from others would be profitable? Will the person who gave you the tip easily share something that could make you a fortune? Wouldn’t he spend as much as he could if he was so confident in the tip? So, instead of listening to others, do your homework on your own. Find the most dependable or trustworthy individual to manage your investments if everything else fails. You are not required to be involved in every area of your life. If you want to be a doctor, go ahead and do it. You don’t have to be an expert in the stock market. Enable a trustworthy and knowledgeable financial advisor to manage your savings and finances.
Invest for the long term if at all necessary
Taking a long-term view of the stock market can be very satisfying for the average investor. An ordinary person cannot devote the majority of his time to constantly monitoring stock prices. Buying and selling stocks on a regular basis may not be the best option for him. Any purchase or sale should be supported by adequate evidence. Making a large number of decisions necessitates intensive analysis and study, which may be beyond the capabilities of the average investor. Finding a good business in which he can invest his money for a long time can be an excellent strategy. He might not be distracted by the market’s never-ending uncertainty. This could help him avoid costly market timing errors.
You will most likely succeed in your investment venture if you obey these 5 golden rules.