E-StoreWhat not to do while investing.
Many people invest without effectively learning about the investment process or the different investment products and without considering what they really want to achieve over a long period of time. These classes of investors often react to the short-term fluctuations of the markets. By listening to the advice of self-proclaimed gurus they will buy “stocks” at exactly the wrong time, and subsequently end up with huge loss. Investing is not just about picking some stocks and parking your money, but also about avoiding mistakes. Retail investors can be better rewarded if they avoid making the following mistakes.
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Avoid unrealistic optimism- Every new generation that invests in the market pay no attention to past experience. These new investors mistakenly believe that stock prices only go up. Don't be overconfident and don't start believing that you have superior expertise compared to the market.
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Don’t miss the benefits of compounding of capital - The earlier you start investing, the bigger the pool of capital you will end up with for your middle-aged and retirement years. Don't wait to start investing only when you have a large amount of money to put to work. Start early, even if it is with a small amount. Wait this to grow to a very large amount with the passage of time.
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Don’t worry about the market, think only about the stocks where you have invested- Don't worry about the direction of the market, worry only about the business prospects of the companies whose stocks you own. Don't take a view on the market; take a view on long-term industry trends and how the chosen companies can create value by utilizing these trends.
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Buy in times of panic - The best time to buy a stock is when the markets are falling and there is a fear in the minds of investors. But most of the retail investors do exactly the opposite. They sell when the markets are falling and buy when the markets are high. This will cause them to end up with losing twice - by selling low and buying high.
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Don’t take Emotional Decisions- Don't be led by emotions, most of the investors make their trading decisions on an emotional basis, rather than on a logical basis. Emotional investors will sell off their investment when the market price is dropping and buy when the price is going up.
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Fear based decisions- The simple formula of making profit in the stock market is "buy low and sell high". But in practice, only a small number of investors do it. In case the market or share price is coming down, instead of staying around and buying up the stock for very less price, panic and selling off is happening.
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