How not to Lose Money in Stock Market?

If you learn the skill of investing and trading in the stock markets, they can give you multifold returns. However, there are some tips to keep in mind to avoid/reduce losses. Check this article out!

how not to lose money in stock market

Many investors have gained tremendous wealth investing their money in the stock market. There are very simple rules to grow your money using the stock market, but it comes with risk. You must keep a keen eye on the stock market regularly for succeeding there.

Not all investors who enter the stock market succeed. Some end up losing their entire wealth in hope of making profit. 

Through this page we lay out the don’ts of stock market investing for individual investors so that you don’t end up with stock market losses. We would make you aware about what had gone wrong, mistakes you made, and how to stop losing money in stock market.

follow these simple steps to build a great portfolio and to prevent the losses in your portfolio. 

9 Tips for NOT to Lose Money in Stock Market:

1. Stay Away from High Leverages

Everyone knows that you must take higher risk in the stock market to get higher return. Many investors ignore higher leverage comes with high losses and fees also. If there is high leverage, many brokers charge extra fees.

When the stock market goes reverse, you will need to be compensated, as there will be more time required to go towards your target. You should use leverage with risk and caution, with only the amount you can afford losing completely. 

2. Diversify Your Portfolio

You should not put all the eggs in a single basket, as they say. There is a certain amount of risk in stock markets. As a wise investor you should minimize your risk.

If you invest in a single company, it is highly risky. However, if you invest in 4 different companies, you may earn less overall, but the chances of losses are less. 

For example, if you invest $500 in 4 different sectors there are chances that one sector will grow and the other will not. You should always choose your best companies and then buy shares in small batches in them.

Ensure that more than 10% of the total amount you have to invest is not put in one company. 

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3. Don’t Predict the Market

It’s a fact that the share market is quite volatile, and you can’t always predict it. It might be possible that the prices of stocks are rising one day and the stock crashes suddenly.

Remember, there is no perfect time to invest in the share market. If you do this, you will never get the right prices for your share and will always aspire for more.

If a pandemic occurs, then you should take advantage of that and invest more. It’s always better to invest when prices are lowest.

4. Do not Be Greedy to Make More Money

The stock market goes up and down every time. It’s common for investors to buy when the prices of the shares rise. Wise investors should pause, till the prices get stabilized for making purchasing decisions.

Also, if a company performed good in a quarter doesn’t mean it will perform good in the coming days also. You should not make a decision looking just at performance for one or two quarters. Stock market always goes for corrections.

To gain more, always buy when the market is low and sell when a company’s share goes the highest. 

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5. Don’t Chase Short-Term Losses

If you have invested in a company by seeing its balance sheet, a good track record and great fundamentals, good, predicted outlook and without much leverage,

keep your share even if they are in losses. Blue chip stocks will always recover. You need to remember that good companies will always recover. 

6. Don’t Care about Analysts Too Much

There are various social media pages sharing opinions about stocks these days. Always remember that no one can’t predict the share market. Do your own research before relying on the analyst.

There have been instances when shares recommended by famous analysts didn’t perform well.  Do your own market research properly before relying on the analyst. Research the fundamentals, and the technical use of technical indications in picking the stock. From this, decide the target you want to achieve with your money.

7. Don’t Forget the Catalysts

Stock catalysts are those factors which affect the prices of the stock market. There can be various factors such as national or international politics, earning results, expansions, management changes etc.

Although catalysts can affect prices of stocks, the impact of them usually does not go on for a long time. But it can also be an opportunity to trade for you. 

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8. Don’t Chase Money All The Time

It’s important for traders to stay calm in the market. Panicking always leads us to lose focus. Stock prices can fall drastically, and it is a rare price for us for a cheap buy.

Take that time as an opportunity to invest and gain profit. Most investors sell their shares in panic and the prices fall drastically. Be patient.

9. Don’t Trade if You Do Not Have A Risk Appetite

The biggest factor to consider while trading with stocks is the uncertainty that comes with its price movements. It is advisable to invest only the amount on which you can take risk.

And booking profit in the share market is always very important. Don’t always wait for the market to go very high. You might end up losing. 

Final Thoughts

If you are a new investor in the stock market, the above tricks may help you reduce losses. When you are just starting out to invest, do so with less amounts so that the losses are not impactful. Learn how everything works thoroughly before putting larger sums of money. 

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