There are things that beginners should do, and should not do in general while dealing in the share market
As with any financial instrument, share market also carries associated risk. This risk can be reduced if we take certain precautions.
Below given are certain general dos and don’ts while dealing with share market.
Things you should do
1. Check if market intermediaries, like DP, broker, sub-broker, agents are registered with the exchanges. In India, all data can be found at SEBI official website. They are given the specific registration number.
2. Always give clear, to the point and straightforward instructions. To the intermediaries like your broker or sub-broker or depository participant or agent, as the case may be.
3. Always insist on your depository participant/ broker/sub-broker/agent to give you contract notes. Whatever type of transaction it may be. In case of any doubt, it is better to verify the genuineness on the exchange website.
4. Settle all the dues completely through normal banking channels with the market intermediaries. They should not be kept pending for unnecessary reasons. Who so ever end it may be.
5. Before placing a buy order with depository participant/broker/sub-broker/agent. Do check about the standing and credentials of the company in the marketplace. Credentials like management, fundamentals, and various recent announcements. And also disclosures made under various regulations, to SEBI from time to time. One can get most of the information on SEBI website, company’s website, business magazines, and financial newspapers.
6. Always adopt trading or investment strategies which are in the line of your risk tolerance capacity. You may be aware that all investments carry risk. A degree of risk does vary for different type investment instruments. It depends upon the strategy one adopts.
7. Always check, verify and confirm before registering with the intermediaries. With any depository participant/broker/sub-broker. Risk disclosure document is available with market intermediaries. Its content should be understood and read carefully. It forms a part of investor registration need.
8. Penny stocks sometimes display abrupt spurt in price. Or sometimes shows high activity suddenly, for no particular reason. Investors are cautioned about these types of stocks. They are high risk, and if positive, give high returns too.
9. Stock market goes up and down. Usually, in the Indian market, it is called bull or bear run. Though no one can guarantee returns. But taking a calculated risk, one can increase more probability of gain than loss.
Things you should NOT do
1. Do not deal with unregistered brokers/sub-brokers/agents. Most of the time, they only flee the customer. Often they wrap up their business all of a sudden, leaving no traces.
2. Do not buy/sell on basis of rumors in the market. Sometimes companies just create rumors to increase their share price or net worth. It is a frequent phenomenon, just to create rumors, and be in limelight.
3. Do not go with unregistered intermediaries. They promise huge and guaranteed returns, which are practically impossible.
4. Many companies show government approvals/registration which may be for some other purpose. It may not be for securities that you are buying. That is, purpose and use may both be different.
5. Never give custody of your signed blank demat transaction slip book in hands of any intermediary.
6. Do not be carried away by the financial figures shown in the advertisement. They may be deceiving. Try reading between lines to understand the true worth of the company.
7. Do not blindly follow the investment gurus. Or those who have profited in past. Because earnings may not depend on past performance. Though, in some cases, they may repeat their past performance or even excel it.
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