Most common mistakes Investors need to avoid

Oops! I made a mistake!

It is rightly said that mistakes are the stepping stone to learning, but at what
cost is the question. Repeated mistake is negligence in itself. How careless one
can afford to be with his own money? Ultimately only one voice is audible;Stock
market is not my cup of tea.

There is no thumb rule as to what is right and what is wrong in the stock market.
You make money, you are right! However, with the study of the general psychology
of the stock market participants we have come across some very common mistakes
that investors tend to commit.

1. Stock market= easy money vending machine
One should know that earning crores just in an hour in Kaun Banega crorepati too
needs a lot of hard work and study for years. Are we expecting the same from the
stock market that too by fluke? Invest your time in research and analysis of the
market; try implementing it virtually to know where you stand and then nothing
like it.

2. Market Timing - Timing the market or predicting the feature price is
dangerous thing in investing. Many greatest investors ,who have a strong view on
the price levels appropriate to individual shares does not try to time the stock
market.

Stock prices do not always move for the most logical or easily predicable way . An
unexpected event can send a stocks price up or down, hence trying to time the
market is inappropriate

3. Following the rules created by else!!
Remember that when one buys, somebody else is selling at the other end. So blindly
following someone can either work for you or go totally against you. So why take a
risk? Just study your own psychology and accordingly build your own rules. Let
others follow you, of course, with their eyes wide open

Loss making trade is held for an investment
The stock which I buy has to go up and if it doesn't I will hold it till I get my
price back! This prolonged trade is termed by many as investment. One needs to
follow the target and stop loss to timely book profits and reduce risk of further
losses respectively. In case you wish to hold the growing stock see to it that you
trail the stop loss.

4. Lack of self study and studying of the self
Trading and investing is like consuming perishables before its expiry and
preserving durables for long. Like other products correct research and analysis
of each and every stock can guide you on deciding which ones are for short term
buying and which ones have to be held for long. However, keep in mind that
perishables can be held for long according to seasonal changes, which can be known
with the macro level study.

5. Investing money which one cannot afford to lose
Borrowing money for investing in the stock market is a bad idea! Unfortunately if
you make losses, you borrow more and it cascades. There is no end to it. So it is
always advisable that you invest only 1/3rd of your savings in the stocks or the
amount which you can afford to lose entirely. Further, be careful while investing
in Futures and options as you can lose more than what you have invested.

6. Emotional attachment with the stock
Some stock has generated huge wealth for you in the past that becomes your
favorite stock. You start believing that the stock will keep on rising. The stock
prices fall due to the management or poor results which is an impulsive fall but
you still believe that its a correction for another positive impulse and you
invest more. Diversification is the best solution to this.

7. Acting upon propaganda
Information becomes news when it is published. So you tend to act when others have
already reacted. Keep in mind that when somebody is telling you something
beneficial that too frees of cost he has already taken a bite out of. Be Fearful
when others are greedy and be greedy when others are fearful

8. Taking revenge on market
When you make losses the investment scenario is wrong, the market is wrong, but
you are right. So instead of booking losses you hold the stock with a belief that
it has to go up. Why stand in front of a bear when you know that it might swipe
its paws down.

9. Trading for overcoming the losses
People do not have holistic approach towards investment. Trading is adopted with
the intention to recover the losses made in investment. They wait for the trades
to give them huge profits that would average out the losses. They land up losing
more!

10. Thinking Investment acting intraday
People hold something for a long but keep on reacting upon its daily price
movements. The stock tends to take small impulsive and corrective momentum within
a big trend. Remember, you need to give time to get the fruits of your labors.

11. Asking stock market to buy your luxury coat
You earn fixed income to fulfill your basic needs. You search for more earning
sources to fulfill your unending wants. Stock market is treated as one of such
sources. You tend to Overlook the market and run behind fulfilling your dreams.
For eg: You need 1 lakh rupees by the end of the year and so you invest in the
market with the intention to earn 1 lakh within one year.

12. Keeping losses and booking profits
Holding falling stock with a belief that the stock will go up some or the other
day or booking profits before time with a fear of losing money; its a loss in
itself. Once, you have set your targets and stop loss you should firmly act upon
it without getting influenced with the daily movement in the prices.
After all its a mind game and take the advantage of this game to learn to improve
your brain health and performance so that next time you will not say, Oops I made
a mistake, instead Yeah I learnt from my mistakes