What precautions must one take before investing in the stock markets?
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Here are some useful pointers to bear in mind before you invest in the
markets:
1. Make sure your broker is registered with SEBI and the exchanges and
do not deal with unregistered intermediaries.
2. Ensure that you receive contract notes for all your transactions from
your broker within one working day of execution of the trades.
3. All investments carry risk of some kind. Investors should always
know the risk that they are taking and invest in a manner that
matches their risk tolerance.
4. Do not be misled by market rumours, l uring advertisement or ‘hot
tips’ of the day.
5. Take informed decisions by studying the fundamentals of the
company. Find out the business the company is into, its future
prospects, quality of management, past track record etc Sources of
knowing about a company are through annual reports, economic
magazines, databases available with vendors or your financial
advisor.
6. If your financial advisor or broker advises you to invest in a company
you have never heard of, be cautious. Spend some time checking out
about the company before investing.
7. Do not be attracted by announcements of fantastic results/news
reports, about a company. Do your own research before investing in
any stock.
8. Do not be attracted to stocks based on what an internet website
promotes, unless you have done adequate study of the company.
9. Investing in very low priced stocks or what are known as penny
stocks does not guarantee high returns.
10. Be cautious about stocks which show a sudden spurt in price or
trading activity.
11. Any advise or tip that claims that there are huge returns expected,
especially for acting quickly, may be risky and may to lead to losing
some, most, or all of your money.
