Precautions Before Investing

What precautions must one take before investing in the secondary stock markets?

  • Here are some useful pointers to bear in mind before you invest in the markets:
  • Make sure your broker is registered with SEBI and the exchanges and do not deal with unregistered intermediaries.
  • Ensure that you receive contract notes for all your transactions from your broker within one working day of execution of the trades
  • All investments carry risk of some kind. Investors should always know the risk that they are taking and invest in a manner that matches their risk tolerance.
  • Do not be misled by market rumours, luring advertisement or ‘hot tips’ of the day.
  • Take informed decisions by studying the fundamentals of the company. Find out the business the company is into, its future prospects, quality of management, past track record etc
  • Do not be attracted by announcements of fantastic results/news reports, about a company. Do your own research before investing in any stock.
  • Do not be attracted to stocks based on what an internet website promotes, unless you have done adequate study of the company.
  • Investing in very low priced stocks or what are known as penny stocks does not guarantee high returns.
  • Be cautious about stocks, which show a sudden spurt in price or trading activity.

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