Nobody's perfect. We are all going to have our days of wins and losses.
Investing in the stock market can be a tricky game, and if you’re not careful, you might end up making some mistakes that could cost you a lot of money.
From outside, investing in the stock market may seem like a stress-free side hustle. First-time investors are too eager to jump right into the investment game, and often not commit to learning from the mistakes of others.
However, first-time investors often find that the truth is far from this myth and jump into the market without proper strategy. Investing takes time, effort and a lot of patience. In fact, in some cases, the investor may continue to make the exact same mistakes over a period of time, when they do not learn from their previous errors.
It pays to remember that the assets linked to the financial markets may shift in value. So, your best bet is to make the most of these investments is to perform careful research with fact and figures and make informed decisions based on facts as opposed to instinct or emotions.
To be a stock market investor, it is utmost important for a person to be level-headed and logical. They should know how to juggle between their rational thoughts as well as gut instincts. Only a level headed investor can think and make wise decisions on the go.
The good news is that most of these mistakes can be avoided by careful analysis and awareness. We will take a look at the ‘7 Biggest Blunders’ that investors make in the stock market.
An old Japanese proverb says that, "you will eventually lose every rupee with which you gamble."
You should never put yourself into the high-pressure situation where you are gambling money on the line whichyou need for other reasons. When you invest with money that you can afford to risk, you will make much more relaxed unbiased trading decisions.
Any sum left over after the discretionary expenses of the investor and savings is what is to be used in investment. Eventually, you will have much more success with your trades, which will neither be driven by negative emotions nor fear.
Planning and strategizing helps the investor to decide and select in what type of securities he must invest in, how long he should invest and how much he should invest in order to get the expected return that he desires.
The downside to not having a proper plan in place is that you have no end goal and you are aimless, as a result, your investment pattern can be quite arbitrary. This may result in greater losses if you’re not careful.
This is a very common mistake, and those who commit it do so by comparing the current share price with the 52 week high of the stock value.
Your lookout should be to invest in companies which will experience sustained growth in the future. Only considering the fact that a company's share price came about to 30% higher last year will not help it earn more money this year.
Avoid buying stocks that simply look like a bargain. It is important always to have a critical eye and be picky while choosing such stocks, since a low share price might be a false buy signal.
Do your homework and analyse a stock's viewpoint or direction before you invest in it.In many instances, there is a strong fundamental aspect for a price decline.
Investors who get greedy have a tendency to get “slaughtered.”
There’s an old saying on Wall Street that goes like this:
“Bulls make money, bears make money, and pigs/amateurs get slaughtered.”
It means that both bullish and bearish investors/traders will make money in markets over time, but greedy investors (“pigs”) will lose money.
In the name of diversification, once the shares starts performing well some investors put all their eggs in one single basket. They have very less amount invested in other securities. This may cause some serious problem if the investor is wrong. Therefore, it is not good to be greedy.
Every time you trade you should ask yourself,“Is this the best possible stock I can allocate my money to?”
The best possible decision from above fact should drive most of your buy/sell/hold decisions.
Some investors have a tendency to sell their winning stocks too quickly so they can confirm with profit and hold their losing stocks for too long so that they can avoid a loss.
One common example of this blunder, is an investor who would rather hold onto a losing stock until it gains +20% back to where he bought it than take the loss and allot the money to a stock that gains +30% over the same time period.
course, investors don’t analyse more on this situation, but clearly, we can see now that, the 30% gain is much better, if you visualize properly instead of avoiding the pain of “locking in a loss.”
For a long-term investor one of the most important - but often overlooked - things to do is qualitative analysis, or "to look at the big picture."An investor can earn more profit in the long term rather than a short timeframe.
Assessing a company from an approximate standpoint is as important as looking at the sales and earnings. Also, ensure that you have at least some investments in your portfolio that you plan to hold for 5 to 10 years, at the very least. This could maximize your returns greatly.
Write out your short-term goals and long-term goals, and design a perfect plan for your future. Pick an investment strategy that includes signals and guides for the long run.
It’s good to stay up-to-date on the markets, economy, and your investments. Just don’t pay too much attention to the daily excitement of the “talking heads” on TV.
Financial media is often designed to stir up the adrenaline and emotional parts of your brain to invest in impulse decisions rather than help you make better investing decisions.
Buying on tips from the media is a speculative gamble and makes an investor greedy. If one really catches your attention, the first thing to do is consider the source. Stick to your basics and do your own homework so that you know what you are buying and why you are taking positions.
Next time you're tempted to buy based ona hot news from media, wait/don't do so until you've got all the facts and figures and are comfortable with the company and risk. If possible, take unbiased opinion from informed investor
The Bottom Line
As a child, you didn’t learn to ride your bike without taking a few falls. You didn’t learn a bicycle without falling at least a few dozen times. One can become professional only by learning from his mistakes. Practice and take a next step with careful strategy and money management.Hence, you can't make things better for yourself without practice and knowledge. In the case of the stock market, one needs to join share market classes in Jaipur and acknowledge yourself with the different stock market strategies.
If you are looking to make a jumbo win by betting and risking your money on your gut feelings, try the casino.
Every investor makes mistakes. Everyone has to learn at some point. What matters most is that you must be ready and eager to learn new things and always improve how you invest. Most successful traders are constantly studying their techniques, looking for an additional edge that may help them make more-informed decisions.
Take pride in your investment decisions and in the long run, your portfolio will grow to reflect the integrity of your actions.
If you have the money to invest and you are able to avoid these blunders, you could make your investments pay off; and getting a handsomereturn on your investmentscould take you closer to your financial goals.
Please understand that mistakes are part of the process and learning to reduce them could help you develop a more disciplined consistent approach to trading.
Armed with all the above mentioned knowledge and guidelines, you’re now all set to begin investing. All the best !!
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