May 24, 2024

5 Mistakes To Avoid While Investing In Stocks


Hispanic young male stock trader typing on keyboard while using computer at home

Not every investment move in the stock market is beneficial. A novice and even a trained investor can make a common mistake that can reduce the wealth and even destroy the investment funds. The selection of the right stock is not a guarantee of the right investment action. If you are a new investor in the field of the stock market, then friends and other people who trade in the stock market, create a high standard of returns in your mind. This illusion of high returns with simple buying and selling encourages mistakes.

Here, you will find some common mistakes that can be the reason for a reduction in wealth and more losses on the investment.

1. Chasing high returns only:

Although returns are an important element in investment, chasing returns is not a good option. Investors think that returns are the only way to fulfill financial goals, but it is not a sound approach. If you buy and sell stocks through a Bajaj Financial Securities trading app in anticipation of high returns only, you are not on the right track. 

Chasing returns in the short-term won’t help you in fulfillment of financial goals. It can even destroy your invested funds. For example, an investor ABC bought a stock that had around 20% return. After buying stock, he sold out his stocks due to a decline in the prices. Now he invested his funds in other stocks having good returns.

You should trade and invest in the stock market to fulfill your long-term investment goals. Try avoiding consistent buying and selling of stocks to earn a return only. 

2. Imitating someone’s portfolio:

It’s a common tendency of people to imitate someone’s activities and actions. In the stock market, generally new and retail investors follow some prominent investors and their portfolios. If a particular investor’s portfolio dispenses good outcomes, then it attracts new investors to emulate the group of stocks and other securities. 

Having similar stocks like a prominent investor’s portfolio does not guarantee a high return. Returns and price increments depend upon several factors like market conditions, weights to each security in portfolio, fundamentals of a company. If you copy or imitate a portfolio of any investor, then you need to analyze each and every element of that portfolio. Many trader apps have investor-friendly platforms that assist in analyzing stocks. You should invest in the market with your mind after getting proper knowledge of stocks.

3. Investment as per other’s recommendations:

Investment and trading with stocks can be advised by any investor mind. It may be possible that you are not highly efficient to earn the best return, but you can earn a better investment goal with the help of online training and trader apps.

If you buy and sell a stock just based on another’s recommendations, you are not perfectly accurate in trading. Every investor has his /her own risk appetite and investment behaviour. This investment move for other stocks may or may not be beneficial for your investment in the stock market. You should make a perfect move to investment that will protect your wealth.

4. Concentrated investment:

A most common mistake is the allocation of funds in one or few stocks only. Generally, an investor puts most of the amount in a few stocks with high returns. Every little fluctuation affects the value of an investment. A small negative move in the price of an invented stock can destroy your invested wealth. 

You should not invest in just a few stocks. An investment portfolio should be diversified to several low-cost to high-return stocks. In online trading, you can analyze through a trader app each and every concept related to a company and stock.

5. Investing with emotions and personal sentiments:

Investors usually invest their funds in some securities with some personal attachments. Sometimes, you get attached to a stock or a company. Don’t use this personal attachment in investment behaviour. Sometimes, a company’s fundamentals do not perform better, and values drop down consistently.

In this case, if you hold your security, your emotional action can ruin all your efforts by destroying the investment funds. Here, you need to skip the personal attachment with a company and sell the stocks through online trading. You need to invest like an independent investor. Your goal would be direct toward the achievement of financial goals. 

These familiar errors in stock market investment can reduce your large amount of wealth in a short as well as a long term period.