It is a well-known fact that stock market is a hub of making money, provided you have patience, confidence, and risk-appetite. But in the last few years, the scenario has slightly changed due to the volatility of the market. Making an investment and earning a profit out of it has become slightly difficult and has thrown the investors into the lap of confusion and dilemma, especially when it comes to purchasing and selling equities. However, there are a few golden rules that can lead you to the right direction for the long-term equity investment.
Sell the losing stocks and ride the winners: The first thing that a long-term investor must know is when to buy and sell equities. Usually, investors earn profit from selling appreciated stocks and hold onto the declining ones. This can lead them to the worst scenario to witness the stock sink to the point where it is absolutely worthless. Rather, the idea should be to hold onto the high-quality investments and sell the poor ones, as there is no guarantee that the latter will rebound after a protracted decline.
Don’t chase tips: Whether tips come from your brother, friends, neighbor or broker, you should not accept it true. Cross-check the information with various other reliable sources and research well to ensure that the tips you heard are correct. Relying on tidbit information from various sources is not only like taking an easy way out but becoming a sluggish investor who cannot succeed as a long-term investor.
Don’t panic about short moves: Do not panic if your investments experience short-term movements because this is just a part and parcel of every equity trading. Rather, try to look at the bigger picture while tracking the activities of the equities and avoid the inevitable volatility of the short-term. Also, do not plan to buy and sell equities based on the difference of a few cents. Keeping a track of day-to-day and minute-to-minute fluctuations as a way to earn a profit is usually done by short-term traders. For long-term investors, the gains come from a different type of market movement that occurs over years.
Don’t think too much about the P/E ratio: Investors are often found to be too much thoughtful about the Price-Earnings ratio (P/E ratio) while taking buying and selling decisions. It is true that P/E ratio plays an important role in making an investment decision but using it for deciding to buy and sell equities is not advisable at all. A low P/E ratio does not necessarily mean an undervalued security, nor does a high P/E ratio mean an overvalued security.
Plan a strategy and abide by it: There are many ways to become successful in investment and trading and no particular method can be tagged to be the best one. Every investor uses different strategy according to their investment plans and goals. Try to find your style, stick to it and follow meticulously in order to gain profit in the long run.
However, if you feel that planning a strategy is not your cup of tea then you may hire the services of a full-service brokerage firm, who by analyzing your financial need will present a suitable strategy for you.
Author Bio: Being a premium brokerage house, Narnolia Securities Limited wants to leave no stone unturned in making the investors successful into trading and investment. Since they believe that investment is a serious business, they offer many tips on both long-term and short-term equity investment.