10 common mistakes in the share market by beginners:-
Mistakes? way of learning. Always learn from your mistakes, take a responsibility of own mistakes and try to avoid it, it shows high morals of man. But in share market, one thing always keep in your mind that mistakes in share market never be forgiven. So it never be good to commit any error, always try to learn from others. Maybe after your own mistakes, you would not able to stand again.
There are 10 very common mistakes in the share market by the beginners:-
1. Looking on stock market as a tool of making quick money:-
Beginners enter in the share market with the mindset that “share market is gambling and they can make quick money here” it’s wrong mindset. They mix Gambling with share market that is not right and it dishonor the share market and create bad reputation on others mind. In the gambling you put your money in bets but in share market you invest on companies. And with some basic knowledge you will never lose.
So if you are here for quick earning then you have chosen wrong platform for it.
2. Wrong broker selection to inter into share market:-
It’s very first step you take while entering into share market. Which broker is best for the beginner? It’s one of the serious problems for the beginners. Beginners carry very limited capital (money) at the time of entering into the market so minimize your expenses so that you can able to hold enough money in pocket to invest in share market.
Discount broker must be first choice for the beginners. Full time broker charge each trade when you buy and sell shares and charging price of it much higher than discount broker. So at the time of beginning always try to avoid full time broker. But in case you want to sift from discount broker to full time broker in future then you can easily do that, so here is nothing to concern about.
3. Lack of knowledge:-
Investing in share market without basic knowledge never be good decision, you can win in the short run but definitely lose in long run. So before investing in the share market learn some basics like how share market works? How to interpret financial statement of any given company? etc. Experienced and famous investor shared their experiences in their books so learn from them. Mistakes in share market never forgiven.
4. Money madness:-Control yourself when you have money in your pocket. It’s very common between the beginners that they quickly pick any share which they can afford to buy, what is the quality of that share? didn’t matter for them. Never invest your money only because you can buy it or have enough money for that. First, research carefully and then go to next step.
Picking good quality shares is like finding needle in grass. So here is huge possibility that you end with bad quality shares and lose all your money.
5. Following tips:-
Today everyone claim themselves an investor but in true sense most of them are speculator, without reasonable thinking they invest on the basis of news or what other person have said. Today so many financial news channels have come into existence and all have their own share market experts and these experts are selling their tips from behind the TV screen. Today anyone can become share market expert and needs only one thing that is “a coat suit”. Wear it, and now you are share market expert. Never invest on the advice of others.
One thing always keep in mind that “no one cares about your money, only you” so think twice before investing as per someone advice.
Beginners hold their shares for very limited or short duration, and sometime it’s not reasonable time for shares to grow. You can earn more handsome profit if you able to hold good quality shares for long duration. Warren Buffett holds his some shares for more than six year, what a patience level he has?
7. Following herd:-
If you want to be safe then walk in group this is the jungle rule, you want to move in right direction join the crowd that is the common society rule. But these both rules have no importance in the share market. Warren Buffett once said “be fearful when others are greedy and be greedy when others are fearful”. Detach yourself form wrong direction moving herd.
8. All eggs into one basket:-
You have carried all your eggs into one basket, what happen if you drop that basket? All your eggs would get broken. Let compare it with share market, all these eggs are your money and that basket is your single share in which you invested all your money. Then what happen if that share price decreases? it will eat your total investment. So diversify your eggs into different basket. Put your money into different good quality shares. So that in worst case scenario, you are able to hold some money to reinvest.
9. Day trading/intraday trading:-
Day trading never be for the beginners, it’s a very riskier form of trading. No logic work in day trading. And has eaten lots of investor’s money. Beginners are very attractive of it because they see it as a tool of making quick money and day trading sounds very cool.
Day trading attracts charges and taxes related to per trade like brokerage at the time of buying and selling etc. Inexperience trader will definitely lose his money here. So for the beginners it’s best to avoid day/intraday trading.
10.Excessive leverage/margin trading:-
It never be good decision to take loan and then invest it in the share market. Beginners easily convince themselves for margin trading without knowing its dark side. Margin trading looks good only when your shares prices move upward but as soon as prices moves downward then it start eating your money with much higher rate. Small decline in share price can badly affect on your total investment.
Above mentioned 10 mistakes are very common by beginners in the world of share market. Beginners should be very careful in every step so that they can avoid these minor mistakes and safe oneself from ruin own investment. There are some best beginners books on share market, read them and improve your investment decision.