5 Mistakes beginners commit in Stock Markets and should be avoided
Stock Market is a wonderful place. It can give you lot of profits and can also burn your all savings. It depends on investors how better they play the investing game.
No one is perfect in stock markets except few. There are very less people who regularly make enough earnings from stock markets. Stock Market is the only place which can make you richer if played well. A small amount can fetch great profits in stock markets.
Here are the some mistakes which small or beginners commit in stock Markets:
- Speculation and trading in Options and Futures: You have to understand that speculation needs a deep understanding of the products, unless you know what are options and how to speculate in stock markets, speculating can be a danger game for your investments. You can read the basics of options and futures in stock market in earlier post.
- Buying Penny stocks: Garbage is garbage even if bought for free. Some investors try to find penny stocks in hope of multiplying investment. Never invest in a script with no business and dont think if an useless script is available in bottom should be bottom. Even if script moves upward, it will come down once stock market starts moving on fundamentals. Remember, dont invest in stocks only because they are at life time low.
- Investing for short term: Investing for short term is another mistake many investors do. Warren Buffets and Rakesh Jhunjhanwala buys the shares which they can hold for years. Buying stocks for short term is a kind of speculation only and not real investment.
- Investing more than you can afford: Always invest in stock market, the money which you can afford to loose. Never invest or speculate in share market with borrowed money which you cannot pay back. Stock market is not like investing in real estate, prices of stocks may go up or down.
- Investing in only one stock: Never invest in only one stock. Invest in different stocks and creat a portfolio. Always invest in group of stocks instead of a single stock. By investing in different stocks you scatter your losses. Sometime one stock can cover your losses in other stocks. Just think if did not have that one stock in your portfolio.
Investing in stock market is an art and science. It involves a deeo handling and professional approach. Never go on buying stocks which does not have any fundamental to support. Buying stocks based on rumours can burn your money.
Mutual funds are a suitable investment product for beginners, what is your opinion on this?
As per me mutual funds are really better if you are happy with small profits and do not want to take more risk.
Mutual funds are secured to some extent since professional manage them and even risk is divided among many stocks instead of some stocks.
Yes i agree mutual funds can be an option for risk avoiding investors. But if you want more returns than direct investment in equities is prefered.
Risk is higher if you dont choose mutual funds but even returns are more. Mutual funds on an average may give return of 10-30% whereas if you select a good stock returns can be many times.
But again choosing mutual funds or investing in direct equities depends on your risk appetite, time and expertise.