What Are The 5 Golden Rules Of Investing In Stock Markets?

Now, it’s time to turn your eye to additional investment opportunities. First thing you need to do is open a brokerage account. With a brokerage account you can invest in stocks, bonds, mutual funds, certificates of deposit, real estate, and more.

It is a question of what you want when selecting a broker: are you looking for a relationship with a traditional broker, or will you place most of your trades online? Lower trading costs are the main benefits to trading online. However, many brokerage firms allow the client to choose at the time they open their account.

In this article we are going to take a look at some specific behaviours that often produce above-average results. So get comfortable, kick off those shoes, and stay for a while. Here are five things that can help produce higher profits on your long-term investments.

Maintain a Low Turnover

The first golden rule is to understand the potential perils of turnover and the frequent buying and selling of investments, as these have been well documented. Many investors simply don’t understand that holding on to assets they own can result in higher long-term returns.

Invest in Value

To be successful, it is a good idea to study people and companies that have achieved success in the stock market. The best returns often happen over long periods of time by buying assets for less than their true value. Meaning, when you buy a stock, you should know the growth rate required in earnings to meet your expectations.

Wealth Composition

Often, people who work hard for the income will be frugal when purchasing a washing machine or a television, shopping around for the best prices. The same people will throw cash at a company with even a minor chance of success.

Strategise

It can be fatal from an investment standpoint to invest in a stock because everyone else is. Never buy if

• ·      The price-to-earnings ratio is more than 40 or 50
• ·      The debt-to-equity ratio is too high
• ·      It is something you don’t understand.
• ·      The landscape of the industry is highly competitive
• 
  

View your portfolio as a single equity

Compare the earnings, levels of debt, rate of growth, equity returns, sectors of each stock as if one whole.

Know When to Quit

Avoid expensive and often emotional losses due to following your instincts, such as selling during a crash or buying during a blip.

If the going gets tough, look at investing in index funds. Index funds have a far lower cost than a traditional portfolio. A typical index fund results in lower turnover, which was one of our earlier secrets to beating the market.

In short, if you are looking for a no-brain way to own ACME, PLC, an index fund is probably the way forward.

Making intelligent market decisions is the key to success. Make sure you maintain a good foundation and keep the basics in check.  There is no secret to building wealth; you can achieve it with small and disciplined choices.