Piyush, who is an architect by profession, has always invested in schemes that are risk-free. Recently, his friend Hemant told him about his income generated through Mutual Funds. Piyush decided to take a shot at mutual funds.
Piyush replicated his friend`s portfolio and invested his money. To his disappointment, Piyush did not make as much money as his friend did. He also suffered losses. So what could be the reason behind Hemant making a profit in the same scheme, while Piyush suffered losses?
Piyush committed one mistake while investing in stocks that most Indians make. However, it is better to understand these mistakes initially to prevent losses in the future.
Here is a list of some of the most common mistakes that everyone must avoid while investing in stocks:
- Lack of Planning
Seasoned investors play their game in the market based on facts and figures. However, this is where a beginner can go wrong. Guessing and blindly investing in stocks might appear to be performing well. However, the absence of proper planning and vague end goals can result in a chaotic mess. Always check the financial data of the company you are planning to invest in and then make informed decisions.
- Decision-based on Personal Bias
Being biased can never be beneficial, be it any aspect of life. And the stock market is no exception! Many beginners or first-time investors tend to either buy only companies that are known or the companies they like.
This is not the best way to invest your money in the stock market. The companies you like or know may not be performing well. This way you can also risk your profile or your financial goals.
- Short Term Focus
If you have a notion in your mind that investing in the stock market will make you rich quickly then this is another mistake that you must avoid. Having a short-term goal can leave a huge impact on your investment decisions. Avoid taking rash and uninformed decisions as it can likely result in losses.
These three mistakes are the most common ones that every first-time investor makes initially. Trading in investing and equity in the financial markets requires in-depth knowledge of the stock market.