5 Mistakes from New Investors in Stock Market2 min read
During the last 1 year, we have seen a lot of new investors coming into the market. But what all are the mistakes that are done by them, we are going to discuss that in the article.
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.