Hello Riters, Hope you are doing great. We are back to help you do the personal finance. Today lets take you through some don’ts of a Investor. Lets discuss 7 ways to lose money in stock market and how to avoid them.
- Buy at Bull and Sell at Bear – Yes, you got it. Now get a Beer & chill. Hold on, its not weekend, never mind. Buying at Bull Market (all time high) and selling at Bear (all time low) can cause you to lose money, a lot at times. But how do you avoid that, don’t be emotional and be patient. Hold on to your investment when market is low, and sell when its high. As Warren Buffet once said, “Be fearful when others are greedy, and greedy when others are fearful.”
- Prediction – Can you predict the next Market Crash? Actually, No one can! No one can time the Market. Instead if calculated in a right way, investing early and consistently without worrying about crash, a bear or a bull can give far more returns than trying to time the market and missing out on those occasion or holding on to your cash for that perfect time.
- Listen to Random guy – I mean avoid listening to a random guy on Youtube or a close friend. Do your own due diligence, don’t just buy that hot stock just because Minky told you to do so! Avoid looking for confirmation on Youtube.
- Hope for a Miracle – Hoping for a miracle, chasing that next multibagger ain’t gonna do the trick. There is no guarantee you are ever gonna find a multibagger more so if you are after a penny stock. Instead invest in companies that are fundamentally strong!
- Greed – Getting greedy, fearing that you will be left behind, speculating, always looking for the next big thing, or impatiently dumping all your money on Get Rich Quick Scheme.
- Fees – Overlooking those hefty fees that are hidden under the blanket of complex finance terminology, and blindly investing in that mutual fund can gradually be a big hole in your pocket. For example – If you own a mutual fund with an expense ratio of 1%, you will be losing $1000 per year on $100,000 invested in the mutual fund, by just holding on to that investment.
- Others – Poor monetary & fiscal policy, Geo political instability, currency devaluation are some other factors that can affect the Stock Market valuation.
As Benjamin Graham, once said, “In the short run, the market is like a voting machine. But in the long run, the market is like a weighing machine.”
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