How to avoid Equity losses ?
Losses occur every were, whether it is a game or anything. M.S.Dhoni overcame initial losses and take it as learning to reach heights which nobody in his city has ever imagined. Losses in his case was failing to score in a Ranji match in under 19 category and it went to Yuvraj singh as per the movie. He didn’t lose hope, though he took up railways job. Still he had constantly practised cricket. Finally one day he chose cricket and it took him to great heights which is history and all of us know.Point to take from his life is “Anything has to be taken in a positive way and try to connect the dots or losses later in your life”.
From my own personal experience i had incurred heavy losses due to inadequate knowledge or experience in stock trading initially. This didn’t deter me from plunging into this stock market investment. Now i can proudly say i have somehow understood nitty gritty in stock investing and identifying stocks.
How to Avoid losses in Equity ?
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When it comes to investing in equity which gives high returns which is the perception of many till they learn about it. It is like believing someone and investing based on mobile message tips. At first, you need to identify whether you are trader or investor. When it comes to equity, it is investing which has given great returns in the long run than intra day trading. Even Warren Buffet has apprehensions about trading in stock market. He has always insisted on identifying stock based on intrinsic value which is nothing but buying at much lesser value. After identifying hold on to it for a period more than 10 years. He has always practiced this and advises everyone to do the same.
One of the chartered Accountant friend has plunged into trading for closing down his debt of 8 lakhs. He directly went into futures and options. This made him to take credit card loans, personal loans etc. Finally the equity losses increased the debt to 60 lakhs in the span of 3 months.
Now can you confidently say, whether are you an investor?
1 Have you invested and stayed in that investment for a longer term?
2 Did you buy when the market is at its peak and sold when the market came down?
If you had said “NO” to any one of the above questions, then it is advisable to approach a financial advisor or learn to stay invested in the equity market as said above for a longer period. Getting into investing mode can avoid huge equity losses and also you can be wealthy.
Mutual fund Mistakes?
Even in mutual fund investments, people had chosen funds based on their peers and redeemed when marker goes down. Market has reached its peak when the election was announced in later half of 2014 . Many of the retailers had started focussing on equity mutual fund investments only when it has crossed 27-28000. After this point, market has gone till 30000 . Then it came down drastically over the period of last 2 years to around 23000 .
In 2019, last 2 year returns for even better performing mutual funds has been lesser than 10% due to this stock market performance. In some quarters equity mutual fund flows had taken a hit due to redemptions by big ticket investors. Don’t take your investments out of equities if it had suffered interim losses. Analyse with your financial advisor and identify the reason for it losses. If you are satisfied with the reason or if your advisor advises you to stay invested, please continue your investment.
Better idea to avoid these interim losses or blow away this fear may be to invest in equity for a longer period. Wealth creation becomes easy when you have longer horizon. Also by choosing debt funds wisely based on your goal.