We have seen investors money getting doubled in a very short span of time. So many stocks have jumped and investors are with complete excitement. Markets are teasing so many new investors !!!
We felt its a good time to make investors cautious especially those with no experience in stock markets. Getting carried away is very easy at times like this even for experienced investor.
Don’t get easily convinced with Experts
Every day, in the newspapers, on financial-news shows and online, dozens of market strategists make bold predictions about the direction stocks are heading.
Take their forecasts by thinking twice before you act on them.
After all, current prices already reflect the sum of stock-market buyers’ and sellers’ opinions. If one investor is bullish, there must be another investor on the other side at the current price.
Forecasts get better as more experts opinions are brought in.
Take expert predictions lightly, and if you act on them, make small moves rather than drastic ones.
An expert who was once “right” won’t necessarily be correct again the next time. In choosing which experts to listen to, pick ones who seem aware of the uncertainty of their predictions and are willing to change their minds.
Remember What Losing Felt Like/Ask an Experienced investor how it feels to loose.
The first principle is that you must not fool yourself—and you are the easiest person to fool.
Many investors appear to be kidding themselves. Financial advisers report that some clients appear to be forgetting the intense fear they felt when markets were in bear grip sometime back.
In 2009, the pain of further losses on stocks was too great for some investors to bear. Now, it is the pain of not holding more stocks that bothers them. “Memory has done a kind of 180-degree turn for some people.
If your records show that you bought or stayed put during the last crisis, then you can probably weather the next one—and should stay put now. But if you sold then, you almost certainly will sell again if the markets take another steep fall. In that case, you should consider using the recent market gains as a gift that enables you to take some risk off the table before it can hurt you again.
Limit Your Risk-Taking
Owning some stock is a good thing for many investors. Over long periods, stocks tend to outperform bonds by a few percentage points annually, giving a powerful boost to portfolios. Investors who dumped their stocks have missed out on that benefit over the past few years.
Instead of periodically bailing on stocks, investors would be better off keeping a smaller amount in stocks and sticking with that allocation in good times and bad.
“You don’t have to rely so much on the market to get you where you want financially, but if you want to rely less, you have to be willing to increase those savings.
Be cautious of the word “Bull market”
Investors who hear the phrase “bull market” might decide it is time to get in on the rally. On the other hand, investors who hear the current bull market in stocks has been running for five years might worry it will soon end. In either case, investors would do better to tune out the chatter. The definition of a bull market is arbitrary, and the term tells investors little about what will happen next.
Terms like bull market and bear market are eye-catching labels—not forecasts.
Question Performance Figures
Past performance doesn’t guarantee future results. In fact, it can be a poor guide to past results, too.
Many mutual funds and investment advisers promote themselves based on their average annual performance over the prior five years. As of the end of March, their returns suddenly looked a lot better—not because the managers have gotten smarter or cut fees, but because of luck.
We are certainly not scaring investors from entering stock markets. Depending on ones risk taking ability-take an action accordingly.
We are only telling “Its your money and you alone are responsible for it”.