When markets go down.
No matter how much research you do, when the markets go down it will take all with it. But timing the markets is a difficult job to do. So my plan is to stick on with markets during thick and thin.
When companies report losses.
When we buy shares of companies, we try to be a part of the profit the company makes. So naturally, when it reports losses the share prices go down. In the long run share prices will catch up with the earnings, whether it’s positive or negative. So do your research in finding out companies with long term earning prospects.
When you follow analyst’s recommendations.
Following analyst’s recommendation about a particular stock is a strict NO. Don’t blame them, they have their own motives behind making recommendations. Anyway not to make you rich.
When you deviate from your well set investment plan due to lack in persistance.
Sticking to a well set investment plan is very important. This is very difficult to maintain during the boom and doom days, since you will be tempted to change the strategy, either to maximize profit or to minimize losses.
strong textWhen you invest in companies with high debt.
When economies or countries go for a downturn or slowdown, the companies most affected will be companies with high debt.
This is the period when sales go down, but the interest outgo will remain same. During boom time, the interest out go wont effect much, since the high interest cost fund will be used to generate more business, which in turn will bring more money back to the company.
When you invest in companies with low promoter holding.
Always be careful, when you invest in companies with low promotor holding. Because management will be interested only in increasing their salaries and not on increasing shareholder profits. Increasing shareholder benefits wont benefit them, since they have very low promotor holding, so the looser from the lack of focus on shareholder benefits will be you and me.