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Investing in Equities Dollar Cost Averaging
Investing in Equities
Expert Articles    

Step1

 Step2

 Step3
  
Start off on the right track
You need to accept the process of investing in equities as one long journey that will constantly enlighten and enrich. Surely you will make mistakes on the way, but credit these to experience. In fact, the earlier you make the mistakes, the more valuable and less expensive will be the experience. What moneycontrol aims to do in this section is help you start off on the right track.
  Diversify your investments
Remember the proverb about `putting all your eggs in one basket'. Well, it applies just as much to investing in stocks. As a thumb rule, you should not have more than 10% of your net worth in any one stock, even if it is the absolute winner of an idea. At the same time, do not hold too many different stocks in your portfolio. It is difficult to monitor them. If you are a passive long-term investor, moneycontrol recommends you hold between 15 to 20 different stocks. (The Need To Diversify discusses the benefits of diversification.)
  Be Disciplined
You don't have to be a genius to be a successful investor but discipline is a must. To be disciplined you need to follow some rather simple rules and follow them well -

1. Do all your research before you buy a stock and write down the reasons for buying it.

2. Analyse your company's performance through quarterly results, annual reports and news articles. The idea of analysing is to make sure that the reasons for which you bought the company's stock remain valid.

3. If important variables i.e. the reasons for buying and holding the stock have changed, then revisit your investment decision.

4. Be unafraid to act (i.e. BUY or SELL) if your "revisit" tells you to do so.
  Set the administrative issues in order
1. Get yourself a good broker. Get access to a broker on atleast one of the two major stock exchanges, i.e. the Bombay Stock Exchange and the National Stock Exchange.

2. Open a depository account. Dematerialise all your stock holdings that can be dematerialised.

3. Understand the settlement systems. When do your payments need to be made or received? Similarly, understand when shares transacted are receivable or need to be delivered to the broker.

4. Always update your portfolio worksheet, detailing all your equity investments held as on date.

If the above processes appear too cumbersome or daunting, it might be better to invest in stocks through equity mutual funds.

You can also use our Investment IQ Test to decide whether you have the required temparement, aptitude and technical knowledge to be investing in equities yourself or whether a mutual fund/ investment professional would be a better option.

In step 3 we discuss how to Set yourself some ground rules Set yourself some ground rules
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