Investing in stock market is a bit complex than most other forms of investments. Besides, it’s not everyone’s cup of cake and must be done only after knowing its positives and consequences. However, in the hope of getting more and more, a lot of investors overlook many important factors required for long term investing, resulting in excessive losses later on. Here are the most common mistakes committed by stock market investors.
1. Overlooking fundamentals
Many a times, investors overlook the fundamentals of the company they are investing in, just to make quick money from the market. Besides, they get carried away by management's overoptimistic speeches and many other such factors and as a result, buy the shares without even gathering basic information about the company and the product and services it provides. A major stock market investment advice is to invest in a company that has consistently delivered earnings growth.
2. Short-term vision
Looking for short-term gains is one of the biggest mistakes committed by retail investors. Also, you should not try to time the stock market. Stock market fluctuates over short periods and your profit or loss will depend on how quickly you clinch the deal at the right moment. Besides, the equity market invariably gives a positive return in the long run. Hence, don’t expect to earn a profit in a short time period.
3. Unwillingness to book losses
Generally, investors cash out small profits on retail investments but fail to accept losses on stocks that are sinking. They even hold the stock back in the hope of getting it profitable sometimes. This, however, results in bigger losses. Also when prices fall, many investors buy more shares, thinking it reduces the average cost of their stock portfolio. Instead, consider stock market investment advice and buy the shares only if the decline in prices is due to a momentary setback and growth prospects are still powerful.
4. Ignoring a portfolio
Though it is good to consider long term investments, it doesn’t mean buying shares at low prices and then forgetting about them. Apart from global/local policies and macroeconomic factors, company’s strategies and management can also affect the prices of shares. A smart investor reviews his portfolio at fixed intervals so that he can hold on to the stock, in case the outlook of the company progresses or remains stable. Besides, he must sell the stocks if they no longer stand true on his assumptions.
5. Entry at peaks and exits at lows
Due to market frenzy, shares are generally overpriced or under-priced. In a bullish market, everyone is buying and therefore investors end up investing in overpriced shares expecting stock prices to continue rising. In a bearish market, on the other hand, investors become pessimistic and sell shares when they actually need to buy.
Smart investors take their investment decisions on a share’s intrinsic value and try to hunt for bargain stocks. They prefer buying shares of a company with strong fundamentals and sell when prices surge.
6. Following tips
Although it is good to follow the advice when dealing in stock market, considering the advice of everyone is not a good practice. Acting on cheap bulk messages that you receive about earning huge profits may land you in some financial trouble. Staying away from such unsolicited mails and messages is a good measure. Also, there are countless websites that offer free advice on the internet. Don’t just follow them blindly. Instead, scrutinize these tips from an experienced equity market research firm.
These are some of the mistakes that investors often commit and needs to be avoided. Besides, keep stock market investment advice in mind to earn profits in the stock market.