Making money from stocks

You can make megawealth in the stock market; you can also lose money- big time. Learn the secrets for profitable investment in shares.

FIRST RULE

The first rule for success in the market is to master your emotions when you are taking decisions on the money you want to put or you have put in the stock market. NEVER GET EMOTIONAL ABOUT YOUR INVESTMENTS

The stock market those not care who you are and what you do. You must be cold blooded when you are deciding to select a stock in which to put your money. The stock market has a life of its own. It follows a certain set of rules and if you violate these rules , you will burn your fingers. Most people invest in some shares just because others are buying the shares. This is not a good enough reason to invest in stocks.

SECOND RULE

Take personal responsibility for the shares you invest your money inYou should be personally responsible for the shares you invest your money in?.

It is amusing that when people want to buy cars, they ask all the necessary questions.

They decide ahead the make of the cars they want, the age, the engine capacity , even the colour?
But when it comes to investing in shares, they go in without any pre selection criteria.

You should set the rules to guide you on the company to pick and you should set another rules to guide you on when to bail out of that share if it is no longer meeting your criteria.

A lot of investors get so sentimentally attached to a stock that they refuse to act if the share price if falling and by implication watching their money go down the drain.

This is financial illiteracy at its best. I wonder why people can’t take a decision on the company if it is not giving them the result they expect.

The way to be a wise investor is that even if your father is the chairman of the company in which shares you put your money, take a firm decision if the share is not giving you the expected result.Setting entry and bail –out rules is particularly very important.

Do your due diligence on any company you want to invest in before you part with your money.

There is nothing that says that you must invest your money if you don’t have a good company to buy. It is your money.

It is your life. You should be the chief executive officer of your financial future.

THIRD RULE

What are your investment objectives. What do you really want from the stocks that you are investing in.You must articulate your investment objectives ever before you spend a kobo on shares. I find it amusing that people would invest their money without first establishing clear objectives they want to achieve.

What is it that you want to achieve?

Is it to make quick money from your investment in shares (speculation)?

Is it to prepare for your financial freedom ?

Is it to become a shareholder in the company one day?

What is your appetite for risks?

Are you a conservative investor who want to play it safe like that man in the parable of talent who hid his master’s money in the ground?

Is the money you are investing the one you can afford to lose?

There are a thousand and one questions you must ask and answer as clearly as possible before you approach your stockbroker to buy shares on your behalf.

Your objective should guide you on which stock to put your money. Don’t copy your friends to set your investment objectives because you don’t have the same realities.

Decide whether you are investing for long term or short term.

There are strategies that go with the two investment horizons.

Without clear objectives you would be confused about the movement in share prices.

So setting clear objectives should be the starting point for anybody who wants to play the stock market profitably.

Doing otherwise would amount to courting disaster.

FOURTH RULE

Set the entry and exit criteria.

The stock market follows some rules and only those who have taken their time to study the rules can hope to profit from the market.

Many people burn their fingers because along the line, they get greedy.

They always hope that the price of the stock they invest in would go further up tomorrow or would stop the slide the next day.

So they keep watching until their valuable investment turns into a mere piece of paper.

This is how wise investors behave.
They are comfortable with making small profits regularly and cutting their losses quickly .

A stock broker once told me that,he does not expect to make more than 30 per cent return on my investment in shares.

So any time his stock hits a 30 per cent return he sells immediately, wait for another opportunity to buy cheaply.

If it is in the same stock , he watches it again, once hits between 20 per cent and 25 per cent he sells.

With this, he believes he can achieve more than 100 per cent return in a particular stock in one year.

But to be successful in this strategy you must know the stock you are investing in inside out and be able to predict its cycle.

He also gave the other side of the rule:- The other side of this rule is that he would never allow the stock he holds to fall below 8 per cent before he sells, no matter the reason for falling.

This is the only way to minimize losses and still be left with something you can invest some other time.

That is why I encourage you to take personal interest in any stock you want to buy.

Educate yourself.

Know the company that issues the shares.

Analyse their annual reports.

Know what is going on inside the company.

As one of my friends put it, you must know as much information on the company as if you are a director.

Invest in educating yourself today.

Don't be greedyyyyyyyyyyyyyy

You will succeed!