We all are in a fast moving world and do not have much time to think When Stock markets are moving up, we do not think much about the stocks we are buying and gets carried away with the Green screen and jump from one stock to other in search of returns willingly or simply switching since the stock we hold are not moving up.
But we should take a Pause to gather a thought about what We want to achieve from Stock Markets. Stock Market is a place where you should have a goal and a plan. Knowing about what we want to achieve and having a goal can cut a lot of task for us.
Example - Lets say one wish to have a returns of about 20-30% annually from Stocks. Then there should be a plan in place with a outline about how we are going to achieve it.
A) Define no of stocks in Portfolio.
B) Have a Exit criteria in place ( Limiting losses, or keep a tab on change in Fundamentals )
C) Choose the right entry price, if you are not having a edge while Buying a stock ( Which is the only thing in our control while buying a stock, should be done with utmost importance)
D) Try not to be Leveraged in Stock Markets, its a two way sward - Cuts equally sharp when movement in stock is not in out favor.
E) Select stocks which are a Part of some theme which is likely to work out in Next 6 months to 3 years.
F) See the previous trend of the sector which you are entering & the future prospects.
G) Do a timely review on how things are progressing
These above are just few simple questions you can ask yourself in the process of achieving what you are targeting.
Moreover - One should develop a circle of competence in the First few years in Stock Market and work within it and Master it. Its never about taking all the available opportunities, markets can give returns if we do only a few things correctly.
Whenever we move out this circle of competence we are highly likely to make mistakes and regret later. Lets do one thing in the markets, lets learn from others mistakes and not make our own or At-least do not repeat our mistakes.
The Purpose of the above post is to make sure, we do not end-up losing or buying stocks which were never in our scheme of things to buy Just because it was going up & then it turns out to be junk.