Tips On Investing In ASX Stocks

  • Oct 21, 2019 AEDT
  • Team Kalkine
Tips On Investing In ASX Stocks

In order to earn good returns, investors need to invest in the right stocks. Besides investing in the right stock, it is essential to have a good trading plan. As per Mr. Stuart McPhee, a private trader, a best-selling author and personal trading coach, your trading plan should take into account three broad areas:

  • Your trading mindset (or psychology)
  • Your money management (position size, pyramid strategies, selecting exits)
  • Your trading method (requirements for trade initiation, filtering processes, daily routine and so on)

Now let's take a look at a few tips which could be useful for investing in ASX-listed Stocks.

Educate yourself about the company, its Products and its Market

Many investors generally follow recommendations of other Brokers and research organisations. Before providing recommendations to investors regarding selling, buying or holding stock, research organisations or brokers usually go through the company’s reports, its background, its financial etc. However, an investor must also do their own research before making investments.

Investors should carefully study the company’s board/Management, its fundamentals, its products, operations as well as the company’s addressable markets. In addition to this, the investors must also follow the recent updates by the company. Tracking recent updates can help investors to be abreast with the latest events effecting the company’s fundamentals.

Investment Planning

As discussed above, it is very important for an investor to have a plan. Once investors gain thorough knowledge about companies and different markets and industries, he/she then needs to focus only on limited stocks that he/ she feels could provide significant returns. While preparing an investment plan, investors must self-evaluate his/her financial needs and appetite for risks. Only then an investor should make the appropriate choice for investment.

Be Aware of the Macro Economic Factors

One of the most important things that investor should take into consideration while investing in an ASX-listed Stock is the macroeconomic factors which could impact the performance of a company.

For example, in the recent times we have seen that due the ongoing trade war between US and China, the prices of commodities were impacted which in turn affected the performances of many minerals and mining companies. The trade war between US and China also brought spotlight on Rare earth companies as many countries, including US are now looking at Australian rare earths companies to fulfil their Rare earths demands.

In Australia, the central bank is bringing in new monetary policies and implementing various financial regulations. An informed investor must learn more about the financial framework as well as the regulatory environment of the country, before investing in financial services or a banking stock.

One other example of Macro-Economic factors affecting the outlook of various companies is the global transition to clean energy which has boosted the demand for battery minerals and other related commodities. As a consequence of this, lithium players, as well as battery minerals producers, are under the radar of investors.

Hence, it is very much essential for investors to be aware of macro-economic factors before investing in a stock.

Placing Stop-Loss Order

In order to limit his/her losses, an investor can place stop-loss orders under which, an investor instructs the broker to buy or sell a stock, once it reaches a certain price.

How do Stop-Loss Orders work?

Let’s say an investor buys an ASX-listed stock at a price $10. If an investor wants to limit his/her loss in this investment, the investor can set a stop-loss order at $8. This means that, in this case, if a stock reaches $8, the stock will automatically be sold at the market price, thereby limiting the loss of the investor.

Keep Emotions Aside

Many times we see that investors do get attached with a stock if they hold on to it for a long time. Then it becomes difficult for them to sell a stock even if it’s the right time to sell. Behavioral economics, as a subject has made deep in roads to understand the investor biases that effect their decision-making abilities. There are numerous biases that lead to irrational behavior by the investors.

Hence, it is very important to keep your emotions aside while making investment decision, albeit easier said that done.

Exiting at the Right time

For an investor, it is very important to exit or sell a stock at the right time. In order to do so, one could set predetermined realistic profit targets. Many a time, investors wait unnecessarily to gain higher return rather than booking profit at the right time. Moreover, exiting the investment at the right time could also help investors in limiting losses.

Don’t undermine Dividends

In a country like Australia, where Central bank has kept interest rates at a record low-levels, dividends are a major point of attractions for many investors. Many ASX-listed stocks pay a good dividend to investors which helps in increasing their overall wealth.

For Australian investors, dividend stocks are very good options if they want to earn regular cash streams.


Don’t put all your money in one stock. Diversification of stocks helps in reducing the overall risks of the investors. Plus, it helps investors in getting less exposure to one sector alone.

Be Patient

As per world-famous investor, Warren Buffett, it is essential to have patience while investing as investments may take some time in providing returns. However, this does not mean that investors should wait too long accumulating losses. Investors must not rush in selling stocks; rather, they should analyze the situation and then should take the appropriate steps.


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