Terms like markets nosedive, trading halted, stock markets slump quite naturally stirs up the fear quotient in an average investor’s mind and the flight to safety and safe havens seems the best proposition at the moment. The heat of hectic trading as the exchanges plummet southwards have often scalded retail investors to the extent that they never ever considered investing in stocks. So what is it with stock that otherwise savings savvy retail investors fail to recognise or which is that factor which can help protect their cash better?
- Avoid Day Trading: Day trading not your cup of tea unless you are a season trader/broker. An average investor is far better placed with a long-term trading position and a reasonable profit outlook in 3-5 years time.
- Look For Value Buys: Don’t buy a stock because a friend did or a broker recommended or you saw an advertisement for. Give a bit of time, go to the exchange website, check the financials of the company, the valuations and the debt levels. Make a decision based on all of these factors.
- Create Opportunities: Don’t give up in the face of a loss. A plummeting market is not a time to sell off. Look for blue-chip high-return stocks that are available at bargain rates instead of selling your existing position at significant loss. Remember it is a cycle, if it has slipped, it’s gotta go up too.
- Not All Midcaps Are Great Bets: You must have often heard of many high beta midcap stocks and often felt tempted to earn some quick profit but always remember do not invest with your eyes shut and just on hearsay. A due diligence with an in-depth study of the counters you wish to put your money in.
- Assess Your Risk Appetite: The ability and appetite to take risk differs greatly from person to person. So therefore make a quick back of hand calculation and check how much of a loss you can digest without it causing any significant harm. Restrict your trades accordingly.
These are some basic pointers that can help you better protect your trading positions. Investing in stock markets can always yield better results and richer returns if handled with care. Last but not the least get out of the herd mentality, don’t sell because everyone’s doing so and don’t buy because everyone’s buying. Check, analyse and then decide.