The Golden Rule in investing in stock market is never to get out of it when the market comes tumbling down. Most of the small or first time investors fall prey to this phobia in the beginning of their investment career. In fact some of them get burnt so badly that they do not come anywhere near the stock market ever or come only when the market has been rising without respite for more than a year and get burnt again. They forget the old maxim that what goes up comes down, it may take longer but come down it surely will. Therefore, if one has put one's money in the stock market after a careful consideration one can consider further investments if the fundamentals have not changed and only the sentiments have changed.
Small investors should actually look at value investing in small cap stocks. Well researched investments of funds that will not hurt if lost or reduced substantially in a sudden market crash would be the way to invest in stock market. One must learn to treat the money invested as lost for all practical purposes. What I mean by that is invest only surplus funds in stock markets when one is new to this field. Always invest in small tranches and in more than one stock.
Always research the companies thoroughly before you decide to invest in the stock of that company. If one looks around one's life carefully one would realize that there are changes that are taking place every day. Life is such a dynamic thing that what is important or cherished today no longer holds its importance tomorrow. So identify the companies that bring about these changes in our lives, tomorrow they will shift gears and join the big league, they are just waiting for the spark to ignite and move into the next level. So be the first to catch them when they have the potential. Actually, money is made in the stock market by investing in the potential and cashing in on when the potential has been translated into performance.
Think of the growth of the small cap company, the risks that are likely to be encountered, the plans of the company to mitigate those risks, the competition, and the exclusivity of its field and you can do no wrong. The success rate in such investments should be close to 70 to 80 percent if one has been diligent in investing.
Patience is the virtue that will yield rich dividends while panic is likely to make you miss your dreams. If one has done his research and has taken into all the factors into consideration before homing on to the small cap stock small or large blips enroute should not cause you worries.
Do not always expect 300 to 400 percent gains. However, one will get an average of more than 50 percent return annually if one is willing to be a long-term investor. Nevertheless, always be cautious and keep your ears grounded for any change in the government regulatory policies or change in fundamentals of the company. Once you have invested in the company follow it as if you actually own the company and set time and rate of expected return targets. Keep encashing profits regularly. Do not keep tight stop loss limits and have heartburns every time the market slips. Happy investing.