Are you a beginner in the stock market; Let's take a careful step; 6 Mistakes to Avoid
Many people are coming to the stock market after covid. The recent LIC IPO also brought more people into the market. As of September 2021, 70.2 million demat accounts have been registered. This year alone there has been a 40 percent growth in demat accounts. Growth of 20.4 million accounts. Most of them are beginners. Below are 6 mistakes that beginners make while entering the market.
Buy the more expensive ones
Buying stocks that are going up in price is a mistake investors can make without understanding the stock market. Many people use it as a way to easily choose what to buy. Also selling down stocks is a beginner's method. On the face of it, this may seem like a good practice, but in practice, the results will be lost.
Every business goes through ups and downs. Hence market valuations for each stock will vary. Before investing, the company's business and its prospects should be examined. Profit can be made only by tolerating the fluctuations of the market.
Investing in specific companies only
It is a trend among beginners to like a particular company or sector and invest only in stocks of that company. This pattern is also evident in bull markets.
1998-2000 was an investor favorite with IT. Later the investment was in the real estate sector. In 2008, this interest in the FMCG sector emerged. Buying only tech stocks only becomes attractive when prices rise. When there is a pullback, all stocks lose and find it difficult to break out of losses
Trading is not investing
In a bull market, there will be enthusiasm to make profitable bookings and invest the proceeds elsewhere. This is a good thing until the market falls. But you should make sure that you are investing and not trading. Instead, the investor should take time to get a good understanding of the business and hold on to the ups and downs and carry it forward for a long time.
Not averaging
Not every investor's decision is correct. Don't panic if the stock you bought goes down. Try to invest more in the stock in hand when the price is falling. This way you can bring down the purchase price. By averaging in this way, the investor will benefit in the future.
Trust social media blindly
Post-Covid, there has been an increase in the number of new investors. According to this, there are various classes on stocks through YouTube, Instagram and Telegram. Just hearing this and investing blindly is not the right way. It's no different from the old days of the stock market where you blindly trusted brokers and invested.
Invest with borrowed money
Investing with borrowed money should be avoided. Investment requires patience and courage. The lender may not be patient with the investor until the investment is profitable. After a certain period of time, the lenders will ask for the money back. Profit or loss depends on the investor alone. Along with this, there is the facility of pledging shares. Beginners should also avoid jumping into this.
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