Making big money is way different from making quick money, where the former requires a lot of patience while latter require loads of luck.
Should the first on be your choice, then patience is a virtue you need to hold on to, or if in case it’s about quick money, then look out for other options instead of stocks.
Serious wealth creation in stocks is related to more than just about money and bad plans can cost you dearly.
The 7 habits to avoid
Though a compounding asset is magical, it does take time to realize its effects. At about 15 per cent, your capital would grow to 8 times in 10 years and to 16 times in 20 years. Successful investors in sticks usually exhibit this pattern of sticking to an investment on a long-term perspective to experience results.
It is impossible to predict short-term market movements as the stock market is best suited for long-term investing and that there is hardly 1 per cent of investors who are successful in creating serious wealth.
Forgetting Thumb Rules:
Investing requires a religious practice of its laid down thumb rules, whereas, it is quite noticeable that the fundamentals are being ignored to make quick money. Not focusing on a company’s operational and financial performance will sure lead to disastrous results in the long run.
There could be areas where such short term moves might look yielding but without proper valuations, it could lead to nil or negative returns in the future.
Market is always directly proportional to good or bad times in the economy. In accordance to which, even in case of setbacks, stock prices will correct over the long run.
The stock market is now flooded with situations of investors who have tried making the quick buck at the prospect of multi-bagger returns. Instead of running for investing, when stock prices are rising owing to the entry of high-profile investors, a cautious study of the fundamentals and prospects must be practiced. Planning on word-of-mouth advice and by information from commercials could be extremely disastrous. Any related market news or tips should never be on standalone basis but should involve proper analysis.
Attaching emotions to the investments you have made could be make you miss out on opportunities when it could be right time for you to exit and reap profits. Holding back because it was the first investment you and your wife had jointly made, or it was purchased by your dad will make no sense as the market is never bothered as to how you feel about your investments.
Anil Rego, CEO & Founder, Right Horizons describes that when investment strategy is based on emotion, it is definitely not the right one. It might feel like that particular stock is safe because it’s been owned for a long time, but fate of stocks like Satyam, Pyramid Saimira, Financial Technologies, Unitech are an example as to not to cling on to them forever.
It’s not high enough:
Greedy investors are a common scene but even greed is good in only small measures. There has been numerous examples where certain stocks have taken a dive and again hit the roof. Investors who had then strongly believed that it has revived for good and will further increase only, started pumping funds and later experienced corrections again. Investors who had purchased stocks during the dotcom invasion and were waiting for the investments to become tax free only ended up with crashing prices when the buzz ran out.
Looking for gold in the trash:
Value stocks are very hard to find and it requires a lot of methodical hard work and analysis in finding them. Some investors try to figure them out by looking for an all time low in 52 weeks and pump into them. With more price crash, they tend to double the stocks, only to end up with losing a whole lot of money. Many realize this at a very late stage when they have already lost a great deal of money.
Not leaving when it is right:
This again is the biggest challenge that many investors face as to taking a decision about liquidating their stocks. It is never wise to exit a portfolio when it is in a negative zone and following the same pattern could only lead losing wealth instead of growing it. Real money is made only when an exit is planned in a profit making portfolio and not otherwise.