While many investors try to stay away from stock markets, some made a fortune by investing in stocks. So, What is the main difference? How could some people like Warren Buffett, Peter Lynch, and Benjamin Graham, etc make a fortune in Wall St. or Stock markets?
Here are five common mistakes as investors we should avoid while investing in stocks.
Influenced by Media:
No one knows the future of a company, all the news or suggestions by the experts in media are either a prediction or can be a paid promotion, that boosts the share price of a company which can eventually come down and the stock price never raises back. Try not to be influenced by Media!
When you buy a stock of a company, you own a share in the company, and the sustainable growth of the company will increase your share price. So, study the business model of a company and try to make sure if it could perform better for the next five to ten years. Analyze the company’s history, motives, financials from multiple sources before investing in a particular stock.
Short term bets:
Making short term bets, you might make profits on few but usually lose more than what you make and it brings a lot of stress with it, takes tons of time. After deep analysis, when you buy a stock, you may want to hold it for a really long time, like a few years or even longer and you only pay taxes once when you sell.
Due to media etc. most of the time, investors buy stocks while they are supposed to sell, and sell the stocks while they are supposed to buy. If you believe that a company’s stock is available for a lesser price after analyzing its financials etc, buy it even if the market says otherwise. In the same way, if you believe that the company could do much better in the long term, hold on to the stock even when many are selling at a lesser price, if possible try to buy more of that so that you can make better profits.
Don’t invest in a stock blindly just because someone invested, or suggested it. The investment preferences are unique to each investor and you should analyze stock in detail and the opportunity before investing.
“Trust but verify”