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Sunday, December 22, 2013

5 Tips to Avoid Serious Losses in Your Stocks Investment

We've seen the Philippine Stocks Index go up and down for the past several months. Being successful in your stocks investment not only require identifying where you can get the highest possible returns, but also protecting yourself in incurring huge losses.

Here are 5 tips to help you avoid making serious losses in your stocks investment:

1. Don't buy stocks you do not know. Are you the type of person who asks people in forums and social media on which stocks you should buy? Please stop it. They don't know your investment goals. Chances are they don't really care if you lose money. And you don't even know them to trust their investment advice. Buy stocks that you are comfortable holding on to. You owe it to yourself to sleep better at night.
2. Know your investment goal. I used to watch the bids and offers of my stocks during trading hours. What I found out was the more I track a stock's movement, the more I tend to make bad decisions. I watched a stock that fell by almost 3% in less than an hour after I bought it. I panicked so I sold it at a loss. After a month it already gained 10% higher than my buy price! Stocks prices rise and fall all the time. Am I a trader on investor? Because I didn't have a plan back then, I failed to see the stock's potential value.

3. Don't be impulsive. Investing is not an exact science. It is a discipline that requires skill and patience. Investing is not a sport you play. Some people tend to forget, but you can lose actual money if you take the risks for granted. Do not let emotions overrun your decisions. If you can't trust yourself to have that self control, just avoid checking your online investment account too often especially during trading hours. Stay disciplined.

4. Never speculate. Do not base your investment decisions on market rumors. Do not capitalize your hope. If you are holding a stock for a year now and it is 20% down on your portfolio, it may be time to cut your losses. Do not expect that the worst is over just because you've been holding a stock that's down and beaten for so long. If it has underperformed for a long period then there's a likely chance that it's better to sell it. Rather than speculate what stocks will rise and fall, consider buying stocks that has high dividends payoff. This would give you some cushion if the stocks price fall. Besides, an additional 2-5% return from dividend would really be nice.

Steve Jobs
Now is the Best Time to Use Your Emergency Funds

5. Continuously study. Before you even press the buy button you should at least have an idea why you chose that particular stock. But your obligation does not end there. If you are serious at earning in stocks find time to update what you know periodically. Do not limit yourself to the stocks on your watchlist. Broaden your knowledge. Consider other investment vehicles Learning about macro economy can also come in handy because it can also affect the market outlook. Almost all of the market analysts would say the Philippines is still on track to meet its growth target, but why are local stocks still on a downhill? The outflow of funds from foreign investments put more sellers on the market, and the law of supply and demand states that when supply exceeds demand, prices will most definitely fall. Your commitment to learning will be a good safeguard against uncertainties in the market.

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The information provided in our review may not be as relevant today given the time gaps and change in varying economic conditions. While we strive to account every business possibilities that may affect a company's profitability, this is not a recommendation to buy or sell these particular stocks. We cannot be held liable for any investment decisions made in consequence to our articles.