You have gone
and purchased the stock on the basis of the hot tip given
to you by your broker/friend. However before doing that, here
are some things you should know about the stocks.
You are a part-owner of the business:
When you are buying stocks of a company A, you
are actually contributing to the share capital of the company.
It means whenever the company makes a profit, you too participate
in the company's profits. And when the company suffers a loss,
you must also put up with the losses.
Share price can be very volatile in the short term:
With the growing attraction of making short-term money, people
tend to indulge in day trading. This induces a high degree
of volatility in the stock price in the short term. It is
better to ignore this volatility and instead focus on the
company fundamentals. Invest in quality companies. This will
not only protect you against losses but you will earn good
returns in the long run.
Stocks are long-term investment: Buying
a stock is always for a long term. You should invest
those funds that you will not need for another 5-10
years. Always buy when the markets are falling. This
will help you get good stocks at bargain prices. Don't
buy when the markets are going up. You may end up paying
more for a stock.
Plan your asset allocation wisely: Just
because stocks give higher returns doesn't mean you
should put all your money in stocks. The high returns
are due to the volatility inherent in stock market.
It is better to allocate a part of your portfolio for
debt. So in case, you need money urgently, you can always
redeem the debt to use the money.
away from 'hot tips':
It is common sense guideline, but unfortunately
many people don't follow it. Don't fall for the tips given
by your friend or broker. Tips are just lot of hot air with
no justification. Instead carry out your own independent research
before investing. Also don't copy the investment style of
your family and friends.
different and can take different levels of risk. Find out
your risk-appetite and invest accordingly.