Stock markets are one of the most effective ways to save, invest and grow your money. But with so many people relying on it for their financial well-being, there is a lot at stake. This article shall give you 5 golden rules to help you invest more wisely and avoid losses in stock market basics:
Rule 1 – You will save tax but you may not benefit from capital gains.
There is a probability that you will save tax if you invest in stocks and mutual funds. However, capital gains may not be as beneficial to you as they were before. This is because the government has changed its rules regarding investment income. Now, if an investor owns stocks through a mutual fund, then he or she will have to pay a few capital gains on the profit that he or she makes from selling those holdings at some point in time (or even later).
Rule 2 – Do not use your stock market investments as a last resort to pay off loans.
You mustn’t invest in stocks that you don’t understand. If the stock market is too complicated for you, then it’s best to stick with investing in low-risk bonds or cash. If a company goes bankrupt, there will be no return on your investment and this can cause huge losses for investors who hold shares of that company’s stock at the time when it becomes worthless because of bankruptcy proceedings or other legal problems affecting its operations.
Rule 3 – Don’t invest just because the government is investing in a company.
When it comes to stock market investments, you should be wary of investing your money just because the government has invested in a particular company. The reason for this is that governments may have an agenda when they invest in certain companies and there are many reasons why they do so. For example, if the government invests in a particular sector or industry, it could be due to the strategic importance of the sector or industry rather than purely based on financial considerations alone (i.e., profit-making potential).
Rule 4 – Don’t invest in penny stocks unless you are confident in your analysis.
When it comes to penny stocks, you should know that they are shares of companies that are not listed on the stock exchange. Penny stocks are risky investments as they have low market capitalization and can be traded at a meagre price.
Rule 5 – Don’t go by what the masses say. They will always be on the wrong side of the trade.
The most important rule of all is the first one: don’t invest in companies just because they are going up. Many companies have been on a downtrend for years and still haven’t recovered their price tag. This brings us back around again to Rule 3; don’t put all your eggs in one basket—even if that basket happens to happen to be a high-risk investment like stocks or real estate investments like condos or apartments!
The rules are simple. You should invest in stocks only if you have a long-term view of their prospects and your overall financial goals. If you want to make money from stock market investments but don’t have time to research the authorised person properly, then go through these tips section for help.