1. News about ethical, regulatory and legal offences by companies, promoters or officials can cause a sudden stock crash.
2. While losses cannot be completely eliminated, risk can certainly be reduced.
3. Give primacy to good corporate governance, sound management and decent track record while selecting stocks.
4. Ignore investing in companies where promoters have been involved in shady affairs, as any scandal can bring down stock prices very rapidly.
5. Small investors are worst sufferers as they usually come to know of corporate frauds and other such issues much later from secondary sources after damage has already been done.
6. A Google search will inform everything about a promoter group, and if its track record is blemished, even if in dealings outside its business, avoiding stocks of its companies is safer.
7. Put rigour into your research, beyond PEs and 52-week high and lows, by studying balance sheets, annual reports, auditors' notes, cash flow statements, opinions of independent directors, and votes of mutual funds during annual general meetings, by accessing publicly available information, companies' and mutual funds' websites.
8. Diversify across a basket of stocks, or invest through mutual funds offering readymade solutions, if you don’t have time, inclination or expertise to research stocks.
9. Another way is to first identify sectors you want to invest in, and then buy top 3-4 scrips from those sectors.
10. Small investors could also track mutual funds and FII holdings in stocks they own, although even they can be caught on the wrong foot if vital facts about a company have been concealed, as a fund manager looks at a company’s audited balance sheet and takes it at its face value, and in case books are fudged, there is no way he can avoid fraud.
2. While losses cannot be completely eliminated, risk can certainly be reduced.
3. Give primacy to good corporate governance, sound management and decent track record while selecting stocks.
4. Ignore investing in companies where promoters have been involved in shady affairs, as any scandal can bring down stock prices very rapidly.
5. Small investors are worst sufferers as they usually come to know of corporate frauds and other such issues much later from secondary sources after damage has already been done.
6. A Google search will inform everything about a promoter group, and if its track record is blemished, even if in dealings outside its business, avoiding stocks of its companies is safer.
7. Put rigour into your research, beyond PEs and 52-week high and lows, by studying balance sheets, annual reports, auditors' notes, cash flow statements, opinions of independent directors, and votes of mutual funds during annual general meetings, by accessing publicly available information, companies' and mutual funds' websites.
8. Diversify across a basket of stocks, or invest through mutual funds offering readymade solutions, if you don’t have time, inclination or expertise to research stocks.
9. Another way is to first identify sectors you want to invest in, and then buy top 3-4 scrips from those sectors.
10. Small investors could also track mutual funds and FII holdings in stocks they own, although even they can be caught on the wrong foot if vital facts about a company have been concealed, as a fund manager looks at a company’s audited balance sheet and takes it at its face value, and in case books are fudged, there is no way he can avoid fraud.