Do you wish to be a part of the nations’ growth story? You must participate in the stock markets. You can participate in the stock market by two methods – investing in shares and trading in shares. Also, as an investor, you have many products through which you can invest and trade in stock markets. However, before you invest or trade in stocks, there are certain mistakes you should know and must avoid. Here are five key mistakes that you should avoid while investing or trading in the stock markets.
Chasing known and more prominent brands
As a beginner, you naturally want to start your investing journey with known companies. However, that may not be the best decision since some companies may be overvalued. Also, it may be the scenario that certain companies don’t suit your risk appetite. So it is in your best interest to not follow the herd blindly and invest in known companies always.
Timing the market
This is the most common mistake made by the people investing or trading in the stock market. Who doesn’t like to buy at a low price and sell at a high price? Everyone wants that scenario. But, keep this in mind, even the most successful and marquee investors have not been able to time the markets. So, it would be best to not try to time the market but rather invest with a longer time horizon with suitable products.
Following the tips provided on social media
Do not invest in a stock just because you have heard the name on Twitter or received an SMS. Remember, you do not invest in a stock but in the underlying business. Hence always do proper research before you buy any stocks from India. Always do your basic due diligence before trading in shares and in case of any doubt, always consult your financial advisor.
Creating a concentrated portfolio
Many people tend to think that they have picked the correct stock and invest everything in a set of specific stock(s). This creates a very concentrated portfolio hoping that they will beat the market. However, you should not follow that approach. A concentrated portfolio comes with huge risks and can provide suboptimal returns. You must keep this in mind and should have a diversified portfolio when it comes to share trading.
Replicate successful investors’ portfolio
You must have seen people sharing Rakhesh Jhunjhunwala or Ramesh Damani’s portfolio on social media. It is then very tempting to mimic the same portfolio. However, the caveat is that the big investors have much more information about the company, and you will not know when they exit. So it would help if you carried out your due diligence and then invest rather than randomly following the big investors’ portfolio.
To conclude, the mistakes mentioned above are to keep in mind while share trading. Apart from that, invest in share market regularly and make sure that you make the most of your stock investing and stock trading journey.