Have you ever think why new investors most of time failed in market. ? Why only few make real money in stock market? What new person in stock market should do or should not do? If yes I have answer to the root of this problem.
There 3 common mistakes that most investors do. I call them 3 Sins of Stock Market.
- Losing Money:Most Investor knows this basic rule “Never Lose Money”. But still they end up losing money. Because they keep holding the looser in hope of recovery. Simply say if you have purchased stock and it went down by 20%. And you wait as you not want to lose money. But this same stock has capability to go more 20% down. Not taking loses in market is biggest mistake most of investors do. Short term downside is normal, but if stock is going down for years or not moving for years then this is also one kind of loss as you are missing opportunity to allocate this money to some other good stock. Remember there is no Successful investor who didn’t book loses. Taking lose is part of Journey and Investor must accept it.
- Buying Quantity then Quality: Every new investor does this mistake. They like buy 100 stocks of 10 over 1 stock of 1000. Cost is same but he thinks he will get better chance with 100 stocks then 1. But in market price doesn’t matter. In both case investment amount is 1000. And in both cases if stock goes up 10% you make 100 profits. So your buying decision should not be just on price factor. I have seen stock worth of 5000 in my career which I didn’t added because of price and same stock is now 22000 in 4 years and still going up. And I also seen stock which was 20 buck 4 years ago and still around 20 odd today also. Yes I am taking about Eicher Motors and Suzlon.
- Selling Winners: This is where successful investor standout form ordinary investor. Buy Right and Sit Tight. When you get stock which has shown potential to go up, you should not sell it for ordinary profit unless it’s really necessary. Stock which went up 50% has capability to go 100%. Smart Investor is one who adds stock on raise not on fall. Averaging should be done for stock which has shown its potential to go up not for stock which has shown its potential to go down. Buy correct stock and let compounding do its magic.
“To make money in stocks you must have the vision to see them, the courage to buy them and the patience to hold them. Patience is the rarest of the three.” — Thomas Phelps
Be Smart. Invest Smartly.