Top 5 Mistakes Investors Make In Stock Market

Top 5 Mistakes Investors Make In Stock Market

Investment is a process which can help in creating a lot of wealth. In this journey of creating wealth, investors make a lot of mistakes and a successful investor will be one who learn from every mistake and tend to avoid such mistakes in future.  So from my experience here are top five mistakes that many investors make that you should avoid:

1Herd Mentality

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When things are hot on the stock market, people tend to follow the herd and invest in those hot sectors. The frenzy in the market doesn’t last long and Investors tend to get trapped on the top levels of the market. Investment should be the value hunting process where the stocks are available on good valuations.  So instead of buying 1,000 shares of the hot thing today, it’s best to look for something that will make you money in a long time frame from now.

2Not Following Proper Due Diligence

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Once the investor starts making money on the investments, he /she gets overconfident and tend to make mistakes in buying without proper due diligence. Without proper due diligence, no investments in stock markets should be made and proper research and understanding of the business should be undertaken.

3Penny Stocks = Cheaply Valued Stocks

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Many often think that just because it’s a penny stock, they are going to produce bigger returns.  Retail investors are always prone to such gimmicks where they buy penny stocks thinking that will rise multifold. Actually investing is done in wonderful business which provides consistent performance giving them an edge over other businesses. Actually the price of the stock doesn’t matter but their valuation and future outlook matters.

4Listening to the Experts

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Never turn on the TV, listen to CNBC and buy the stocks that they are recommending.  Whenever you buy stocks, don’t let the TV tell you what to buy.  Instead, what you’re going to want to do is research the companies on your own.  Look at how long they have to be around, their debt equity ratio and their projections for the future and just get to learn more about the company.

5Wanting Quick Results

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The stock market is a slow compounding machine if you’re looking to make good money.  If you want to invest Rs.1,000 today and expect Rs.100,000 tomorrow, then you probably should stay away of the market.  You’re just going to hurt yourself down the road.  Again, it’s always best to invest into something that can make you money in a long time frame from now.  As long as you have patience and conviction, it can really pay off a lot in the long haul.

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