6 Mistakes the Investors do That cause the Lose of Money in Stock Market
No body likes to lose the money either in the stock market or either ways. Every one wants to earn the money and increase the assets. So here we have summed up some tips that may help you to not losing the money in the Stock Market.
These 6 Tips may not be sufficient to increase the return but it would be fruitful to overcome the loss that may occur.
1. Not buying the Stock that you Know
Some people buy the stock just because the financial pundit and advisor recommend them, even without knowing about the stock.
So always buy the stock you know well.
2. Not Keeping updated with the Quarterly Reports
Warren Buffett was once asked how investors can make smarter decisions. He reportedly held up stacks of reports and said, "read 500 pages like this every day. That's how knowledge builds up, like compound interest."
Keeping upto date with the quarterly report will give the latest overview of the company their weakness, strength in the recent time and their forecast and plannings.
3. Ignoring forecasts and valuations
Many short term traders rely on the murky notion that the "trend is your friend." This basically means following trading volume and price fluctuations while ignoring a business' fundamental growth and valuations. But if you do that, you violate the core tenets of long-term investing -- to understand how fast a company is growing, and to determine if a stock is cheap based on that growth.
4. Applying Short term trading strategies to long-term investments
Investors also often confuse short-term trading strategies with long-term ones. A classic example is the trailing stop, which automatically sells a stock once it drops by a predefined amount or percentage. That sounds like a smart move -- the trailing stop rises with the stock, and "catches" it on the way down, removing all emotion from a trade.
5. Selling winners and holding losers
Investors naturally want to sell their winners and hold onto their losers. That's because they're constantly afraid that their gains will be erased, and always hopeful that they can recover their losses.
6. Failing to diversify
Lastly, the easiest way to lose money in the stock market is to not diversify. Having a single hot stock account for 100% of your portfolio might be great when that stock goes up, but you'll be in big trouble when it comes tumbling down.
Likewise, buying a lot of stocks from a single sector doesn't count as diversification, since bad news about one company often drags down its industry peers.
The key takeaways
The stock market can be tough for unprepared investors. But if you try to avoid these six common pitfalls, I think you'll stand a better chance at growing your investments instead of losing all your hard-earned money.