10 Golden Rules For Investing In Stock Markets

The lure of big money has always thrown investors into the lap of stock markets. However, making money in stocks is not easy. It not only requires oodles of patience and discipline, but also a great deal of research and a sound understanding of the market, among others.
Stocks, bonds, cash, real estate and other investments provide varying rewards: Some protect against inflation, and others provide the growth or income you might need for specific goals.

Do what successful investors do and apply the following rules:

The 10 Golden Rules For Investing In Stock Markets:
  1. If you don't understand the investment, don't buy it.
  2. Invest early to take advantage of compounding over a greater period of time. By investing today, you widen your investment horizon and increase your chances of growth.
  3. Invest monthly. By investing often throughout the year, you can make the most of market highs and avoid being hit too hard by the lows. Most funds start at R300 a month.
  4. The greater return you want, the more risk you'll usually have to accept.
  5. Don't put all your eggs in one basket. Try to diversify to control risk exposure, ie, invest in different companies, industries and regions.
  6. If you're saving over the short-term, it's wise not to take too much of a risk. It's recommended you invest for at least five years. If you can't, it's often best to steer clear of investing and leave your money in a savings account.
  7. Don't panic. Investments can go down as well as up. Don't be tempted to sell or buy shares just because everyone else is.
  8. Go for investments that offer tax benefits. Currently we have investments offered by various companies that are tax free, make the most of them . They still generate capital gains and dividends.
  9. Have a balanced portfolio that contains bonds as well as stocks. This is less risky than a portfolio consisting solely of stocks. Your portfolio should include several asset classes to reduce the risk of a downturn in one sector.
  10. Once you're in, be patient and don't be rattled by fluctuations. Stick with your plan but when you make a mistake, don't hesitate to correct it. Learn more from your bad moves than your good ones.
Your financial needs and personal situation are evolving constantly, therefore it is essential to review your portfolio once a year or whenever a major event happens (buying a home, having a child, receiving an inheritance, losing your job) to make sure that your investment strategy is still in line with your needs.