Posted on September 12, 2009 by Nayab Naseer

The stock market is a good place to make some extra income. However, there are a few precaution investors should take, failing which they are most likely to loose their investments.

The basic principle with which everyone enters the stock market is to buy low and sell high. However, in actual practice may people do exactly the opposite. The reason could be attributed to being swayed y emotions of panic. When prices of a stock tend to rise, people, eager to ensure they do not miss the boat, start buying. This is the first fundamental mistake. Any stock purchase need to be based on informed decisions and not on sentiments. The second mistake is to sell on panic when prices start tumbling. There would invariable be temporary dips or market crashes when the prices of all stocks would come crashing down. Panic selling during such times would most likely result in loss of capital.