4 Mistakes To Avoid While Investing In Stock Market
by Priya Jain Business ConsultantSummary: While investing
in stocks it is easy to get carried away by numbers and record highs. Don`t
make these mistakes in the stock market especially when it’s too tempting.
Investing in a
stock market is a serious affair and a long-term game. Despite this, many
investors in India tend to succumb to their emotions every time the market hits
a new high. There have been many firsts for the Stock Exchange. When it hit
1,000 for the first time, it was an all-time high! And then it reached 10,000,
20,000, 40,000, or 50,000…and with every new record, the story continued.
There will be a
time when the Sensex will cross the 100,000 mark and then 500,000, but we don`t
know when that will happen. No matter how many records the market is breaking,
the basic rules of investing don`t change. If there is one important thing that
you should remember while investing in the market, it is that market high is
not a destination; it is a journey towards wealth creation.
To ensure that
this journey is smooth and produces desired results, you can listen to a business
motivational
speaker who has a good experience in financial investment.
Here are some
golden tips that you should consider before investing in the stock market while
it rides the bull:
1. Avoid Fear Of Missing Out
Many people suffer
from FOMO or fear of missing out when they could not participate in the stock
market rally. Recently, the same happened in India and now there is a strong
urge to invest before they lose more. But fear of missing out on some perceived
gains should not be the guiding principle when it comes to investment. It is
best to avoid FOMO because it will lead to many irrational money decisions that
will result in losses.
2. The Market is Smarter
A market is a
forward-looking machine. It means that the market always sees things we cannot.
It has discounted the third or even the fourth wave of the pandemic. However,
there is a huge difference between the market's performance and a nation's
economy.
The Sensex has its
own rules, which is why the market keeps proving everyone wrong. This is why
investors should not overthink. Focus on diversifying your portfolio, asset
allocation, and risk profile. Control the controllable before it goes out of
control, i.e., your behaviour, your money, and hence your losses. To know
everything about Share Market from the scratch, watch here: https://www.youtube.com/watch?v=L_iJCNzDe-s
3. Don`t Invest in Meme Stocks or Trending Stocks
You must have
heard about various stocks and their sky-rocket prices without any strong
fundamentals in place. It is a pure play of operators and the community.
Similarly, many people invest in penny stocks and meme stocks in India based on
the news for a quick gain. However, always know the fact that whenever a stock
is trending, it is trending for the wrong reasons.
It is important to
remember that you are investing in businesses and not in stocks. Find good
businesses, and avoid investing in memes and penny stocks. Understand your risk
profile, and financial goals, and do thorough research before you pick any
stock, the way you do it before buying a car or a house.
4. Don`t Follow Anyone Blindly
Be it Rakesh
Jhunjhunwala or Warren Buffett, never follow anyone blindly. These legendary
investors are experts in the stock market and there is nothing wrong with their
investing advice, but the issue lies in following any advice blindly. If you
follow Warren Buffett, you must be aware of his famous quote on
diversification. He says, “Diversification is for the ignorant.” It simply
means that those who know how to pick the right stock at the right time should
only invest in a few stocks instead of spending on multiple stocks across
multiple sectors. But this does not always work for a retail investor.
When you invest
only in a few stocks, you put yourself at a huge risk of having a concentrated
portfolio. So always have a diversified portfolio, unless you have the money,
time, and expertise to select stocks like Warren Buffett.
Never invest in
one go, especially when the market is showcasing high fluctuation. So unless
there is a good correction, always spread your investments into tranches. For
example, if you have Rs. 5 lakh to invest, then divide that into five or six
months and invest accordingly.
The idea of
managing a business is easier said than done and we completely agree with you.
This is why to help you move forward with your business goals, we at Bada
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Created on Jul 27th 2022 02:26. Viewed 183 times.