Investing in stock market can often lead to a lot of losses. This is because understanding the stock market is not as easy as just looking up today’s 22k gold rate in Haryana or Thiruvananthapuram and just investing the cash. This is because there are so many options and decisions that need to be made. Hence, we have made a list of some of the simple steps that you can follow in order to minimize your stock market losses.
- Do not Invest in Stocks Without Research
The majority of investors invest money in stocks without doing proper research on the company and its financial performance. They simply go through the past performance of a company and buy/sell stocks based on their gut feeling or by following someone else’s advice. It is one of the biggest blunders that every beginner makes.
- Do not let your broker control you.
Before starting to invest in the stock market, beginners need to understand that the role of a stockbroker is only to help you execute your orders, but not to decide what stocks you should buy or sell. This is because he/she doesn’t have your financial goals and objectives in mind. Hence, you should always take full control of your investments. Following this step is absolutely crucial because just like investing in gold merely by looking at today’s gold rate Miryalaguda or Bhopal because your broker told so could be dangerous similar concept applies to the stock market. Check out this page for more info.
- Do not let emotions control you.
Most people in the stock market act irrationally mostly because of their emotions. For example, if the share price goes up 5-10% within a month, they would expect the same return in the next few months irrespective of how the business fundamentals have changed. Similarly, if the share price falls by 5-10%, they would expect it to fall further without considering how well the company has performed in recent times.
Due to this emotional behaviour, they tend to make big mistakes such as buying high and selling low, which can cost them a lot compared to other investors who act rationally, even though they are not well-versed with technical analysis or fundamental analysis.
- Do not speculate on stocks
Don’t get trapped in the greed for higher returns. Do proper research before buying a stock and make sure that it is fundamentally strong. Invest in stocks with a long-term perspective. Don’t buy stocks based on tips or short-term price movement. Since money is involved, don’t bet your money on stocks unless you are very sure that they will reach your financial goals.
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- Do not trade frequently
Stick to your investment plan and don’t trade frequently. Every time you trade, you have to pay brokerage fees and taxes which can erode your profits significantly. Moreover, if you are not investing in good stocks, chances are higher of losing money by frequent trading. The stock market is volatile and has its ups and downs. If you sell when the market is going down, the chances of suffering huge losses are higher. So, don’t trade frequently unless it is very necessary. Buy stocks only when they are going down in price because of temporary factors. Otherwise, if you invest in high-quality stocks at regular intervals, they will give good returns over time even if there are ups and downs in between.
- Don’t adopt the herd mentality
Let’s face it – we are all susceptible to “herd mentality”. We tend to get excited when the market is rising and euphoric when the market is booming. We tend to do things that everyone else is doing, and we tend to ignore our instincts.
The stock market is not a place for those who follow instead of leading. You will not be able to become successful by simply copying what others are doing. You need to be different from other people to succeed. Try to use the experiences you gain from your and other people’s mistakes so that you don’t repeat them.
You should not get carried away with the stories of other people making money from a particular stock. Investing in stocks is all about taking calculated risks and doing your research to find out whether a particular stock is worth investing in or not. You shouldn’t be buying a stock just because someone else has done it successfully.