Important Rules for Investment

As equity markets have hit record highs in recent days, it is important to remember a few important investment rules.

These rules are not unique or new. They are simple, but easily forgotten when markets are rising inexorably.

1. Buy Quality Stocks

Select blue-chip stocks and focus on the long-term success of your investment. Unless you are investing funds you plan to spend in the very near future, it is better to focus on long-term gain as opposed to immediate results.

2. Go Against the Herd

When everyone agrees on the direction the markets are taking, regardless of the reasons given, usually something else happens. Remember that a herd mentality won’t necessarily net you greater profits.

3. Let Winners Run but Sell Losers

In other words, keep your winning funds and let them do their thing. Get rid of investments that are not doing well. The average investor does the opposite, selling winners and keeping losers, hoping they will make a comeback. Often, they don’t. You are better off eliminating the dead weight of a fund that has a low return rate.

4. Buy Cheap or After a Market Correction

Of course, we all know that buying low and selling high is ideal. However, it is still good to be reminded to wait for a market correction in order to get a good deal and avoid overpaying for an investment. You would hate to pay an overinflated price, only to have the cost corrected after purchase.

5. Be Patient

Never rush to make an investment. There is nothing wrong with sitting on cash until a good deal comes along. Avoid emotional decisions and look objectively at the market.

6. Turn off the Television

A good investment is never dictated by day-to-day movements of the market; it is far too volatile to base such an important decision on. A good investment is based on long-term, reliable market research and not on erratic, day-to-day market fluctuations.

And finally…

a lost opportunity costs nothing
but a loss on an investment cannot be replaced.

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