7 don'ts of stock investing

7 don'ts of stock investing 

Stock markets are a crazy place to be in volatile times. Making a quick buck is exhilarating but losing money is equally frustrating. Every stock invested in is an experience and has lessons to offer. An investor who has burnt his fingers in the markets has advice to offer on how to invest. Some of the most common mistakes which investors should avoid are as follows:


Buying on tips: This malaise is rampant in the Indian investing population, which punters and market makers use to the optimum. What you as an investor should do is not buy anything that you don't understand. Do your own research.


Trading too much: The trading bug is infectious and hard to get rid of. Trading reduces returns. The most common mistake which investors should realize is that companies are meant as ‘investments’ and not as trading opportunities. You start making more mistakes with more number of trading decisions.
 

Buying into market trends: The most common mistake is that people buy according to market trends instead of buying businesses. A bull-run does not mean that a company with a bad business will do well. Your stock will only move up if profits surpass expectations.
 

Buying junk stocks: Taking a position in a stock, which has no business model can be dangerous. You may be left with dud paper at the end of the day. ‘Vanishing companies’ are commonplace in India.
 

Overconfidence: Don’t be overconfident. Many investors fall prey to overconfidence, trading too often and these blunders can really cost you. Never bypass the basic tenets of investing.
 

Panic: Fear stops you from optimizing profit or minimizing losses. Let fundamentals dictate your decisions not emotions.
 

Chasing performance: Too many investors buy stocks when they're at their peak, after a long run-up. The fundamental rule is "Buy low, sell high".

And finally in Sir John Templeton’s words know that outperforming the market is difficult task. Invest-don’t speculate.


Happy Investing