A stock market investment is a lucrative option for enhancing one's wealth. Brilliant success stories have been written where people from humble backgrounds have converted their moderate wealth to considerable riches and went on to become millionaires. But at the same time there have also been people who have staked huge amounts in the market and have miserably lost it all. So in order to avoid tragic possibilities one should employ some general cautions and follow some basic steps to avoid committing mistakes.
One primary mistake is that people generally do not diversify their investment. When you are investing huge sums into a particular sector of industry, you are running the risk of capital loss. Investing narrowly without proper diversification intensifies the portfolio risk factor. Mitigate risks by distributing your eggs in several baskets.
Proper timing is crucial for stock market success. Based on their instincts or the current market swings, traders are in the habit of employing the right timing strategies to earn profits. But as we all know many times the market behave in a skewed way nullifying all predictions. Thus when an investor invests a lot with the expectation that prices would go up further or when he sells off hefty amount of shares in a falling market in a panic and the market does something different contrary to all predictions it is then that the investor loses big way.
Generally, people have been known to avoid reinvesting the money they gain from one investment. They just hold on to their proceeds in cash. Investors are advised to reinvest their incurred profits in various other stocks creating a diverse portfolio.
People also tend to take decisions on the basis of their emotions rather than on market reality. This is another serious mistake, which even experienced people make while playing in stocks. They prefer to go by instincts rather than going by data collected from extensive market surveys.
If you are not careful, you might also end up paying huge sums as investment fees or commissions. So before investing, consider the factors like investment trading fees, investment transaction fees, and investment advice fees because they might just add up to lower your investment returns considerably. Search for brokerages with modest commissions in order to have healthy investment returns.
Acquiring debts through credit cards for investing is another big mistake which some resort to. But one should remember that money borrowed through credit cards is not free money and there's the possibility of getting mired in debts as the loan amount along with interest keeps on getting accumulated.
Some people explore stock markets very late in life. This delay in investment can be translated as missed opportunities. But even retired people can go ahead and invest any amount that they won't need for a few years. One is never too young or too old to be investing in stock market.
Having too ambitious expectations from the market might also act as a deterrent in some cases. You might not be satisfied with the returns and go out in search of more opportunities with even higher returns. The newer portfolio might just be too risky and also you might lose out on the modest earnings that you were enjoying from your previous investments.
So at the end of the day in order to avoid the most common errors made while investing, you need to have a bit of market knowledge, base your decisions on realistic data, understand your investments well and track your investments regularly. Do not follow the advice of your broker blindly, have a set goal, assess your risk levels clearheadedly and allocate your funds wisely and at the end of the day you would be a happy man fully satisfied with your market returns.
By Vijay Kumar Sharmr
One primary mistake is that people generally do not diversify their investment. When you are investing huge sums into a particular sector of industry, you are running the risk of capital loss. Investing narrowly without proper diversification intensifies the portfolio risk factor. Mitigate risks by distributing your eggs in several baskets.
Proper timing is crucial for stock market success. Based on their instincts or the current market swings, traders are in the habit of employing the right timing strategies to earn profits. But as we all know many times the market behave in a skewed way nullifying all predictions. Thus when an investor invests a lot with the expectation that prices would go up further or when he sells off hefty amount of shares in a falling market in a panic and the market does something different contrary to all predictions it is then that the investor loses big way.
Generally, people have been known to avoid reinvesting the money they gain from one investment. They just hold on to their proceeds in cash. Investors are advised to reinvest their incurred profits in various other stocks creating a diverse portfolio.
People also tend to take decisions on the basis of their emotions rather than on market reality. This is another serious mistake, which even experienced people make while playing in stocks. They prefer to go by instincts rather than going by data collected from extensive market surveys.
If you are not careful, you might also end up paying huge sums as investment fees or commissions. So before investing, consider the factors like investment trading fees, investment transaction fees, and investment advice fees because they might just add up to lower your investment returns considerably. Search for brokerages with modest commissions in order to have healthy investment returns.
Acquiring debts through credit cards for investing is another big mistake which some resort to. But one should remember that money borrowed through credit cards is not free money and there's the possibility of getting mired in debts as the loan amount along with interest keeps on getting accumulated.
Some people explore stock markets very late in life. This delay in investment can be translated as missed opportunities. But even retired people can go ahead and invest any amount that they won't need for a few years. One is never too young or too old to be investing in stock market.
Having too ambitious expectations from the market might also act as a deterrent in some cases. You might not be satisfied with the returns and go out in search of more opportunities with even higher returns. The newer portfolio might just be too risky and also you might lose out on the modest earnings that you were enjoying from your previous investments.
So at the end of the day in order to avoid the most common errors made while investing, you need to have a bit of market knowledge, base your decisions on realistic data, understand your investments well and track your investments regularly. Do not follow the advice of your broker blindly, have a set goal, assess your risk levels clearheadedly and allocate your funds wisely and at the end of the day you would be a happy man fully satisfied with your market returns.
By Vijay Kumar Sharmr
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