7 Things To Avoid While Buying Shares

Article Written By: aranmathi

While many of you will get advices from family and friends, stockbrokers about 'how-to invest in shares, the things you should not be doing are the ones that get lost in the information overload. So here are a few 'DON T s that you need to keep in mind while investing in shares

Don t buy unlisted shares: Stock markets do not authorize trading in unlisted shares or allow their registered members to deal with them. This forms the first rule of the game to follow. Thus, trading with unlisted shares will not fetch you the security cover of the stock market authorities and most of the stock brokers too will not encourage you to do so. To do transactions you need to know the market prices of a share. How will you know this if the shares are unlisted? This will mean that you are in the dark even about the performance of your shares and trading with such shares becomes a nightmarish task

Don t invest all your money at once: Spread out your savings, you can never be sure that one particular type of investment will do well all the time. By diversifying, you are reducing your risk of losses

Don t buy inactive shares: Shares in which transactions take place everyday or almost everyday are known as Active shares. In a way, it is also an indication that the concerned company is doing well and hence the risk in investing in such a company is less. Inactive shares hardly have trading occurring 7 times a year or sometimes even less. Such companies offer attractive prices in order to promote their shares which nobody is interested in purchasing. As a beginner investor in shares, you ought be aware of such companies and focus only on shares that will be of some value to you even if the purchase price is higher than these cheap shares

Don t transact with unregistered brokers: You may see yourself believing tall claims by the unregistered brokers and end up investing in unpopular and inactive shares. News from news channels, financial newspapers and top websites are more reliable for updates and tips. Seek registered brokers and especially those who are doing business with your family and friends for a long time

Don t be in a hurry to invest: Research and observing market trends takes time and practice, so do not be in a hurry to invest without proper planning, diversification and huge money all at once. Reduction in the prices of a share does not mean you need to buy them, similarly increases in prices do not mean it s the right time to sell. Remember, investing in shares is not a gamble

Don t buy shares of closely-held companies: Companies that have less than 7000 shareholders can be classified as closely-held companies. They usually are less active than widely-help companies and tend to be neglected by the masses. Manipulations of shares are more plausible when the number of shareholders is less. This increases your risk as a shareholder. They also have a tendency to be unpredictable due to sudden rise and fall of their share price.

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