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5 Stock Investing Mistakes Everybody Should Be Aware About

05 Jan 2023

Who in the world does not want to make money? Those who are not investing in stocks. Recently, as of 2021, the stock markets in India saw a burst of activity. The hustle and bustle of trading in stocks gained new heights as experts and newbies were all vying for the right stocks to trade at the right time. Many lost money, but more gained and more people entered the fray. While you may be new to the world of stock investing, you may get carried away by the whole stock boom. The temptation of high returns and fat purses is too good to pass up and we’re all thrown into the stock markets with heady optimism.

Common Mistakes 

Prior to your investment in any instrument, you should look before you leap. What are you getting into? You have to prudently weigh your pros and cons, considering your individual investment goals. Mistakes  are all too common while investing, but they can be easily avoided,  if only you recognize them. The errors are failing to plan for the long-term, allowing fear and emotion to affect your decisions. This leads to you not diversifying your portfolio. When logic leaves you, you make mistakes. In the stock universe, thinking rationally and acting within reason is the key to good share market trading. Other mistakes entail ‘falling in love’ with stocks for all the wrong reasons and attempting to time the behaviour of the stock market. There are yet other mistakes of getting influenced by ‘experts’ in the field, and being completely swayed by herd mentality. The stock market is a dynamic place where trading online can get you high returns, especially if you pick your stocks and hold them for the long term. The potential to earn huge rewards through the stock market is high. However, certain pitfalls, five main ones to be exact, must be avoided.

Pitfall # 1 - Thinking Like a Trader

In the arena of stock trading, there is certainly no room for fast bucks, as it is a competitive environment. Everyone wants their pound of flesh. If you want quick and easy earnings, the stock market is not the place to be for a true blue investor. Here’s where there is a difference between a trader and an investor. An investor’s primary focus is to ‘purchase and keep’ stocks, while a trader targets activity to ‘purchase and sell’ shares. So, investors should consider a perspective that is important for the longer term, rather than the shorter haul. However, errors in judgement and high expectations of rapid gains result in mistakes.

Pitfall # 2 - Chasing Gains

In the process of stock investing, while choosing stocks, investors target returns instead of seeing the stock for what it actually is. Each stock you pick is different from others. Movements of stocks are cyclical. Furthermore, a stock may temporarily look rosy in the returns department, but may lose its shine in a short while. 

Pitfall # 3 - Emotional Investment

Getting emotions in the way of any professional activity is detrimental to success. This is true for stock investing also. You may get emotionally attached to a company for various reasons, and this clouds your ability to notice certain red flags. 

Pitfall # 4 - Investing On Advice

Listening to others, whether they are experts in the field or not, is the most common mistake investors make. You have to do your own research and groundwork too, even though you may lend an ear to others. 

Pitfall # 5 - Copycat Share Market Trading

You may not actively follow another investor’s advice, but passively emulate their behaviour while choosing your investment. Copying another investor’s portfolio picks may not be necessarily fruitful for you. You are a distinctive investor with individual differences in terms of factors such as risk-tolerance, ability to invest funds, amount of funding, etc. 

Final Warning

There are many more errors you may make, like not diversifying your portfolio enough, etc, but you can get great insights into trading and investing at Motilal Oswal. With support from this reputed brokerage, you can mitigate errors and be successful. 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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