A stock broker earns money on the traded price. So most brokerage houses offer advise for free to their investors. But keep in mind that whenever there is a loss, you will be impacted and not the brokerage house.

So if you do not want to wash your money, follow below mentioned 4 basic rules.

Rule One: Analyze tips before investing

Do the litmus test. Before you make your investment, test any analyst’s tips for some time. Then decide. Many brokerage houses claim their big research team. They report daily. How many of them will be correct?

Rule Two: Do research first and then invest

Research the first share of investment properly. Ask the broker to report on it in detail. Invest only if long-term prospects are good. Don’t waste time on tips with trigger price and target price.

Rule 3: Soaring price is an indicator of a sharp drop

Whenever a figure is seen at the height, there is a great possibility of progress. But when a share has gone up considerably or has been very fast in a sector, it should be cautious. The higher PE ratio means that the progress rate is going to decrease in the future.

Rule Four: If there is no time, apply money to mutual funds

If you do not have time to choose new shares in your portfolio, do not put money directly into the stock market. Investment in systematic investment plans (SIP) can be a better option as it also creates a lot of value.

Author Bio:

Hi, I am Nikesh Mehta owner and writer of this site.

I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.

I can be reached at nikeshmehta@allonmoney.com. You may also visit my LinkedIn profile.