In March 2020 when the market was at a low of around 7,500 points, it has recovered over 90% to 95% within 1 year only. Many new investors this time has entered the market and made good money but what are the mistakes they might have made:
5 Mistakes from New Investors in Stock Market:
1. Thinking that Trading and Investing is the same:
- Many new investors bought stocks sold at some level and after that bought the same stock at higher levels then again sold.
- Through this cycle, an individual might feel that he/she is earning a good return but in a case, if a company has given a return of around 100%, but due to the trading strategy of the individual, the actual profit will only be around 50% post broking charges, capital charges, etc.
- This trading psychology hinders our investing thought process which could be harmful to the achievement of one’s goal of Wealth Creation or any other financial goals.
- They should learn the discipline to remain invested in any stock for a longer horizon.
2. Thinking Mutual Funds are not good:
- The new investors think that investing in their mutual fund is not good and they want to invest in stock markets by themselves.
- They compare the returns of one stock with the diversified portfolio of the mutual funds which is not the right thing.
- The new investors have not seen the cycles of the market like the experienced fund managers or investors.
3. No Financial Planning:
- The new investors don’t do any kind of financial planning before starting to invest in the asset classes like Equity, etc.
- The individual should always be focused on the goal they are investing for and maintain the inflows and outflows properly.
- One should commence with financial planning and then only should invest and not vice-versa.
4. Not Reading Investment Books:
- The new investors do not read any kind of investment or financial books, they think of them as a waste of time.
- But one should understand that these investment books contain practical knowledge of things and that is going to help them during the long course of investing.
- This includes very good advice as well as learnings of their mistakes which can be proved very beneficial to any investor.
5. Copying Portfolio of Other Investors:
- Many new investors watch various YouTube channels and copy the advice of them buying or selling the stock which is not suggested at all.
- One should invest in stock only by making a rational decision after doing proper research on the shares.
The stock market has seen a huge amount of new investors in the past 1 year and these new investors should always invest responsibly. They should not commit any of the above-listed 5 mistakes if they want to be a long-term investor in the market. Do consult a financial advisor before starting investment journey.