When Should You Avoid Investing In The Stock Market?

Making money in the stock market is all about patience and also a lot about understanding. Equity investment is all about just "hanging in there" despite all the noise around. The noise could come from China or the US interest rate hike. Here's when you should avoid investing in the stock markets.

1) You cannot hold shares for 3-10 year

If you are in the habit of investing for the short term, you are better off trading rather than investing. Making money in stocks would need at least a 3-10 year perspective.

Those who had invested in blue chip stocks in the last 2-3 years have made good money today.

Hence, if you do not have the patience it's best you just avoid investing in the same.

2) You require the money in the immediate future

If you are going to require the money invested in shares in the future, simply avoid investing in the same.

Let's cite this with an example. Say you invested Rs 1 lakh at the beginning of the year (Jan) with the intention of withdrawing the money in Sept.

Now, chances are bright that you would have lost money and you would have to sell shares at a loss, because markets have fallen during the period. So, do not set deadlines for withdrawal of the money.

3) Cannot tolerate volatility

If you cannot tolerate volatility and keep examining your portfolio all the time, it's best to avoid this asset class. Let's give a simple example. The US Fed would meet on Sept 16-17 to decide on interest rate hikes in the US. The Indian markets have fallen on account of this and also on account of the Chinese devaluation. Now, chances are bright that your portfolio would have eroded in the last few months.

If you remain worried about volatility it is best to avoid this asset class.

4) You like to buy on rumors

If you are in the habit of buying on rumors it is best not to invest. This is because, people buying on the basis of rumors have lost money in the past.

5) Stick to good quality stocks

Stick to good quality stocks from the large cap, mid cap and small cap space. If stocks do not form a part of some or the other index it is best to stay away from them. It could be large cap index, small cap index, mid cap index, healthcare index, bank index, IT index etc.

But, you are better-off investing in a company that forms a part of some index, as they would most probably be good quality stocks, though not always.

GoodReturns.in