Investing in Stock Market - 15 Golden Rules Every Investor Must Follow

Stock market is a place where you can make huge profit in short span of time but at the same time your entire capital may get locked if not invested properly.

People fails in Stock Market mainly because they do not follow any rule. They do not have any discipline in their investment, does the same mistake again and again and finally comes out of stock market with huge loss.

If you study the stock market closely you can find that the stock market gives good returns in the long term. A steady and disciplined approach makes every investor rich. Only brokers will be benefited in panic buying and selling.

In this article we have listed 15 golden rules every investor must follow to become a successful investor.

Rule 1 - Follow your rules

Every investor forgets about his rules when the market is volatile. So the first rule is never act against your rules, strictly follow them.

Rule 2 - Invest, do not trade

New investors finds it difficult to understand the difference between trading and investing. Trading is a very short term investment, normally buys and sells shares on the same trading session but in huge volume. Traders never consider the fundamentals of a stock but only looks at the charts for certain patterns to buy or sell. Never look at trading tips and invest in those shares, those are not for you.

Rule 3 - Prepare an investment framework

This is the first step in a disciplined investment plan. Short-list fundamentally strong companies, record them on a paper or a spreadsheet, group them sector wise. Track the performance of these companies time to time, note down the results, growth plans, future expansion plans etc.

Rule 4 - Do proper technical and fundamental analysis

It is always advised to invest in fundamentally strong companies. Do proper analysis before investing in a script, update the details on your script list time to time.

Rule 5 - Revise your investment framework periodically

Based on the company performance and government policies, add companies to the list or remove them from the list. Do not keep too many scripts in your list, this will make your task difficult.

Rule 6 - Control your emotions

Never buy or sell according to your emotions. Always keep your rule book above your emotions.

Rule 7 - Never borrow fund

Invest only if you have enough funds in hand. Never ever borrow money for investment purpose.

Rule 8 - Keep a stop-loss and a target

Always keep stop-loss and target for your investments. Close your positions on hitting stop-loss and at the same time book profit on reaching target.

Rule 9 - Book your profit

Don't be greedy, book your profit on reaching your target. Wait for next investment opportunity. You may keep changing your target based on the script performance.

Rule 10 - Invest in multiple sectors

Market reacts heavily to news and government policies, investing in multiple sectors will protect your fund in a volatile market. Also a diversified portfolio preserves your portfolio value d993e19f-dea8-45d3-8375-4f43322de030 against a sudden fall in any of the sectors you are invested in.

Rule 11 - Never buy for dividend

Common mistake done by investors is they buy shares for dividend, thinking of short-term tax-free profit. If the dividend announced is high, the share value may fluctuate heavily and on the ex-dividend date, the dividend amount will be washed off from the share price, and finally end up in loss.

Rule 12 - Buy when down, sell when up

Be patient, never buy a script when it is up, wait for the share to settle down. Wait for an opportunity to get in.

Rule 13 - Invest in small chunks

Even if you have huge amount in hand, don't invest the whole amount together, wait for an entry point and invest in small chunks. Or you may go for SIP(systematic investment plan) a fixed amount is invested on multiple scripts at periodical intervals.

Rule 14 - Do not blindly follow brokerage houses nor analysts recommendations

Brokers get commission for each buy and sell, they really don't care whether you are making money or not.

Rule 15 - Never invest in penny stocks on seeing 'only buyers' alert

Penny stocks are traded in huge volumes, you will be tempted to buy these shares by seeing 'only buyers' or '20% up' alerts on various news sites. Do not invest on these shares unless you have enough information about the company on their developments, otherwise your funds will get locked for years.


Once again, create an investment framework and invest in high quality stocks in a disciplined manner, strictly follow your rules, success is on your way! Happy investing!

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