Pick safe stocks. Stock picks are paramount in any kind of market, and especially so in a market like ours that has had a significant run up. The market is now trading at around 20 times one-year forward earnings, an unprecedented level. Even at the best of times earlier, valuations have not exceeded 16 times one-year forward earning.

The first mistake to avoid is to assume that the cheapest way to enter this market is through initial public offers.

Says Gaurav Mashruwala, a Mumbai-based financial planner: "Many people say that the market is too expensive and putting money in an IPO would be cheaper. That is a wrong strategy. Companies just getting listed are more risky than established blue-chips."

The safest way to enter the market is by investing in large companies, ideally those that are part of the market index.

Once you gain some experience, you can diversify. Even then, it's better to stick to well-known players. Try and get research reports from reputed brokers. Learn to read balance sheets and understand the industry the company operates in. Ignore hype and, most importantly, do not depend on 'market tips' your friend always gives.

Another important factor to investing safely is knowing when to sell.