Don’t chase a “hot tip”.

Don’t chase a “hot tip”.

Whether the tip comes from your brother, your cousin, your neighbor or even your broker, you shouldn’t accept it as law. When you make an investment, it’s important you know the reasons for doing so; do your own research and analysis of any company before you even consider investing your hard-earned money. Relying on a tidbit of information from someone else is not only an attempt at taking the easy way out, it’s also a type of gambling. Sure, with some luck, tips sometimes pan out. But they will never make you an informed investor, which is what you need to be to be successful in the long run. (Find what you should pay attention to – and what you should ignore in Listen To The Markets, Not Its...
Sell the losers and let the winners ride!

Sell the losers and let the winners ride!

Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined in the hope of a rebound. If an investor doesn’t know when it’s time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice. The following information might help: Riding a Winner – Peter Lynch was famous for talking about “tenbaggers“, or investments that increased tenfold in value. The theory is that much of his overall success was due to a small number of stocks in his portfolio that returned big. If you have a personal policy to sell after a stock has increased by a certain multiple – say three, for instance – you may never fully ride out a winner. No one in the history of investing with a “sell-after-I-have-tripled-my-money” mentality has ever had a tenbagger. Don’t underestimate a stock that is performing well by sticking to some rigid personal rule – if you don’t have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting. (For more insight, see Pick Stocks Like Peter Lynch.) Selling a Loser – There is no guarantee that a stock will bounce back after a protracted decline. While it’s important not to underestimate good stocks, it’s equally important to be realistic about investments that are performing badly. Recognizing your losers is hard because it’s also an...
Don’t sweat the small stuff.

Don’t sweat the small stuff.

As a long-term investor, you shouldn’t panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term. Also, don’t overemphasize the few cents difference you might save from using a limit versus market order. Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement – the one that occurs over many years – so keep your focus on developing your overall investment philosophy by educating yourself. (Learn the difference between passive investing and apathy in Ostrich Approach To Investing A Bird-Brained...
Resist the lure of penny stocks.

Resist the lure of penny stocks.

common misconception is that there is less to lose in buying a low-priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same, either way you’ve lost 100% of your initial investment. A lousy $5 company has just as much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it. (For further reading, see The Lowdown on Penny...
Domestic invester turning to stocks with low FII holding

Domestic invester turning to stocks with low FII holding

Domestic investors, especially high networth investors, are focusing less on stocks that are the choice picks of foreign investors (FIIs). This is because continued FII selling has led to a large supply of these stocks, driving down prices. These domestic investors are instead, turning to stocks with low FII holdings that have seen prices rise. Their shift is supported by data. During the past month, over 70% of the NSE500 stocks with FII holdings of less than 10% have outperformed the broader market. In contrast, 59% of the stocks with more than 10% FII holding have underperformed the market.  Experts, however, advise investors to take abundant caution while selecting stocks with lesser FII holding.  Among the NSE500 stocks, the top gainers over the past month like Godfrey Phillips, Parsvnath Developers, Lanco InfratechBSE -0.33 %, Titagarh Wagons, Firstsource Solutions, Engineers India, KSK Energy, MRPL, GMR, Mahindra Holidays, Gati, TV18 Broadcast and TV Today Network have less than 10% FII holding. These stocks have risen in the range of 10% and 50% as against 4% fall in Nifty.  “Of late, action has been shifted to mid- and small-cap stocks with low FII holding and hence many of them have risen sharply despite weak market sentiment,” said Raamdeo Agrawal, joint MD, Motilal Oswal Financial Services.  “HNIs and to some extent domestic funds, are avoiding FII-dense stocks due to heavy supply in the market”.  Stocks with more than 10% FII holding like Dishman Pharma, Advanta, PTC India, Eros, Kolte Patil, Tribhovandas Bhimji, United Spirits, Kaveri Seeds, Dr Reddy’s Lab, UPL and Rallies India have declined between 15% and 25% in the past one month. ...