Few Stock Tips Must Be Followed by New Investors
A stock market is a place where rags to riches stories are made daily. Every stock market investor always looks for big opportunities in the market. But making money in the stock market is not an easy task. It requires a great deal of research, sound strategies, discipline and oodles of patience. But there is no sure shot formula, which has been discovered for success in stock markets. There are some common mistakes, which are committed by investors, especially the new ones. Let’s look at some of the common tips followed by every investor in the stock market.
- Don’t follow the herd mentality:
One of the common trends, which is followed by the investor, especially the new one is to follow the herd. The typical trading decision is highly influenced by the actions of their peers, neighbours, and relatives. There may be a chance that it works in one or two trades, but the strategy is going to backfire in the long run.
- Invest in a business model rather than the companies:
A new investor generally makes the mistake of choosing big names in the stock market rather than looking at the business models. One of the best tips on investing in the stock market has been to never invest in a stock, but in the business which he/she understands.
- Become a disciplined investor:
One of the key things required to become successful in the stock market is to follow the discipline. An investor who puts money over a period in quality shares and holds on his investment patiently will generate outstanding returns. A new investor must have patience and follow a disciplined investment approach. They must have a long-term, broad view in mind.
- Do not let emotions make your investment judgment:
An investor is also a human and each human sometimes makes decisions based upon emotion. But in the stock market, one who controls the emotion makes the most. A logical based decision helps in tapping of the opportunities available in the market. In the time of the bull market, the lure of quick wealth is difficult to resist. In the time of the bear market, selling off despite looking at the quality of stock is the most common mistake based upon emotion. Instead of making wealth, new investors burn their fingers very badly in these scenarios.
- Having realistic expectations:
A new investor always sets the expectation quite high, before they understand the market realities. There is nothing wrong with hoping for the best from your investment, but those expectations should meet the ground realities. A financial goal based upon unrealistic assumptions leads you towards trouble. For example, during the great bull run in recent years, lots of stocks have generated more than 50 percent returns during the great bull run of recent years.
- Always monitor your profile rigorously:
One of the greatest attributes of a successful investor is to rigorously monitor your portfolio. The Stock market is always changing, so it’s best to readjust your portfolio according to changing market conditions. In case, if an investor can’t review his portfolio due to time constraints or lack of knowledge, then it’s better to take the help of an investment advisor or financial planners.
- Don’t try to time the market:
One of the biggest fallacies of new investors is trying to time the market. Even seasoned investors always advise not to try to time the stock market. On most occasions, if the investor tries to time the market, then it always results in the loss. So, never try to time the market with your hard-earned money.
- Diversification of the portfolio:
A new investor should always focus on minimizing risk. Risk is minimized if the investor invests in various asset class instruments. It will also help in optimizing returns with a low level of risk. It depends upon the investor’s risk-taking capacity.
*Disclaimer: investment in securities market are subject to market risks, read all the related documents carefully before investing