By Anthony oSAE-bROWN
People invest in the stock market because they want to make money. But many times that does not hap-
pen because stock prices start falling and investors start losing the money they invested. So, how do you
guide against losing money in the stock market? Here are 10 tips from the book “101+ tips for the smart
retail investor”
Set limits
Determine the upper limit you will want
to take your profits and the lower limit
you want to cut your losses. For exam-
ple, you can decide that you will take
your profits when your stock moves up
25 percent and cut your loss when the
stock drops 10 percent. Also draw a
defensive line at which you will sell a
stock if it falls to. Your best strategy is to
have a defensive line at which you will
not allow your stock to fall below. This
helps you cut your losses. Move the
defensive line upwards as the stock
appreciates.
Do not sell in a hurry
Beware of selling in bearish market; it
may just be an emotional reaction to
a disappointing result. When everyone
is running, hesitate to join the race, it
may just be the best opportunity for
you to hold and even buy more.
Obey the 20% rule
Any stock that rises above 20 percent
of your buying price should not be
allowed to fall back into your loss
zone. This will ensure that you will maxi-
mize your return on a stock and avoid
unnecessary losses.
Caveat emptor
Be careful making new purchases
when the general market is at the
beginning of a bearish trend. This is
because there will be better buying
opportunities at the bottom of the
bearish run rather than at the top.
Buy at the right time
The object of buying a stock is not just
to be right but to make big money
when you are right. So always try to
buy at the right time
Hold longer when you see
the bulls
Hold longer in a bullish market. Be
defensive in a bearish market. The
longer you hold in a bullish market, the
higher the returns you will make, and
selling fast in a bearish market will cut
your losses.
But be bold
Be bold to sell your least attractive
stock for a more attractive one when
the opportunity comes along. Like a
garden, never fail to weed out non-
performing stocks from your portfolio
Keep it clean
Keep your stock portfolio clean like the
garden, take out the weeds as soon
as you notice them before they kill the
flowers. This simply means take out the
non-performers before they eat out the
profits from the high performers.
July - September 2015 •
The Lion King
• 13
Howtoavoid losingmoney
in the stockmarket
