What’s the biggest mistake that stock market investors make?


Mistakes can happen to anyone, they are part of the learning process, so in my point of view, mistakes should happen to learn something new to everyone. “Take chances, make mistakes. That’s how you grow.” But you have to keep learning from your mistakes.

Most investors did not do enough research or analysis on the sector/script in which they invested the money. They did not make any plans before investing their money. Some traders/investors just go with the market trends which is highly risky.

Here are some common mistakes which most investors can make:

  • Not Understanding the Investment

One of the world’s most successful investors, Warren Buffett, cautions against investing in businesses you don’t understand.

This means that you should not be buying stock in companies if you don’t understand the business models. The best way to avoid this is to build a diversified portfolio of exchange-traded funds (ETFs) or mutual funds.

If you do invest in individual stocks, make sure you thoroughly understand each company those stocks represent before you invest.

  • Falling in Love With a Company

Too often, when we see a company we’ve invested in do well, it’s easy to fall in love with it and forget that we bought the stock as an investment. Always remember, you bought this stock to make money, not to love that company. If any of the fundamentals that prompted you to buy into the company change, consider selling the stock too.

  • Lack of Patience

How many times has the power of slow-and-steady progress become imminently clear? Slow and steady usually comes out on top – be it at the gym, in school, or in your career.

Why, then, do we expect it to be different from investing? A slow, steady, and disciplined approach will go a lot further over the long haul than going for the last-minute “Hail Mary” plays.

Expecting our portfolios to do something other than what they’re designed to do is a recipe for disaster. This means you need to keep your expectations realistic in regard to the length, time, and growth that each stock will encounter.

  • Going with the market trend

Some investors give too much importance to what is written in financial media or in some news channels. They almost always refer to the Financial news before making any investment.

By investing in these so-called fashionable securities, investors fall into a trap of speculation, and when the speculative bubble bursts, investors lose a huge chunk of money.

Rather than just going with the market trend, investors/traders should also do proper analysis and research before believing the trend.

  • Investing like gambling

Gambling doesn’t follow any rules. Some investors/traders invest in securities like they are just doing gambling. They randomly pick any security and if they feel it is doing well, they start investing in it. This is also a big mistake when it comes to the matter of investing.

  • Assuming to be able to get the same profit as others

Some investors look at other investors and in what securities they are invested in and try copying it because they think that the same strategy will work for them too.

This may not always work because the ratios within the combination, that is the number of securities per company, may vary completely.

  • Disposing stock when prices are falling

It is a common practice among many investors to dispose of their stock when the prices start to fall. This may lead to a lot of loss. For example, when BPCL was fallen drastically, many investors sold the shares they held.

Some of them held on to it instead of selling them instead they bought more shares at a lower price. This is why they cut their losses because they take the right decision at the right time. On the other side, some investors who sold their shares ended up with a huge loss.

So it is important to understand how the fundamentals of a company are. Maybe the price fall is only for a short time because of some negative news factors about the company or the sector.

  • Overtrading

It is often thought that an investor trades a lot at once. In reality, the investor does not trade as much. It is also important because by trading a lot, an investor loses his money in fees only. Conducting a few and safe trades within which the investor is able to diversify his risk is the most beneficial option.

  • Investing without research

Just because somebody advises you to invest in some sector, does not mean you blindly go and invest in it. It is important to study and research by yourself for the company, the shares, and the performance in the market before going forward with any investment.

  • Investing in the short term

Traders face volatility problems more compared to investors. The time period of an investment is what differentiates a trader from an investor.

Traders depend on the momentum of the market whereas investors depend on many factors such as market trends, company background, and the company’s portfolio. It is always possible to earn more profit in the long term rather than the short term.

  • Getting Greedy

Whenever we invest, it is most important to have confidence in the shares in which we invested. But once the shares start doing well some investors put all their eggs in one single basket, which is completely wrong.

Instead, they have to invest some amount in other sectors also. This may cause some serious damage if the investor is wrong. Therefore, it is not good to be greedy.

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