Tuesday, September 15, 2009

Survival Kit for Newbie Investor in Stock Market

New to stock market investment? If your answer is 'yes' then read on. If your answer is 'no' then also read on, because to survive in stock market on long term we need to constantly remind ourselves of the simple age old and proven golden rules of investment in stock market.

At this point I am taking the liberty to seek a promise from newbie investors and that is a promise to not make the mistakes most seasoned investors have made sometime or the other in their lives. The harsh reality is that the market does not pardon mistakes and some mistakes can be almost fatal. You can avoid all these pitfalls by simply adhering to certain golden rules which I am terming somewhat flamboyantly as 'Survival Kit for Newbie Investors'.

To further drive home the point let me present to you an unspoken secret of investors in stock market. It is on record that in Wall Street the seasoned traders/investors always talk of their profits and not the losses sustained by them. This gives newcomers the feeling that there is only money to be made in this market and hardly any chance of losses. But the damning truth is that if you do not enter the arena having donned adequate protective gear then the chances of losses are far too many. And your protective gear comprises of the golden rules contained in this series called the 'Starter Kit for Newbie Investors'.

In case you manage to survive without the protective gears then you should consider yourself extremely lucky. If that is the case then you would be better advised to try your hand at a casino, since your Lady Luck is benevolent towards you. For most of the investors though, that is not the case and hence my over-emphasis on adhering to golden rules of investment. To stretch the point further I would strongly maintain that even with protective gear, you need to be always on your guard. Keep your guard up anytime and every time because a champion boxer knows that the moment he lets his guard down in complacency, he can be knocked out by a freak blow. In recent memory one is reminded of Satyam scam as an example of such freak blow.

The bottom line is that if you want to be a consistent champion investor you need to abide by some golden rules. If you have to err, then please err on the positive side. Make no such move that can erode your capital. So what if you have missed an opportunity, at least that mistake has taken nothing from your pocket which is a huge positive in a stock market. This brings us to an important issue of Capital Management which we shall discuss in the next post. Keep an eye on this space daily and get yourself fully armed before joining battle in the stock market.