Investing in the stock market in order to earn profits is very common. Along with earning high profits, investment in the stock market may also lead to losses. While many wonder as to how to invest in share market, below listed are six common mistakes which investors should avoid while investing in the share market. These mistakes must be avoided to earn high profits.
1. Investing on free advice: Many people take investment decisions on the basis of free advice which they receive from a friend or a relative. Usually, people are forced into believing that the investment is for their own good and they invest their hard-earned money without proper knowledge. This free advice might cost you a lot in the future in the long run. Before blindly following anyone’s advice, one should always research and gather facts for himself whether such investment will be profitable for them or not.
- Investing in shady schemes: Many times, it happens that a known person or a friend comes up with a sudden offer for you to invest in mutual funds or insurance schemes and they assure you that it is the best deal which has been created and designed especially just for you. Most people fall into this trap and end up investing in such deals because they trust the person offering the scheme entirely and blindly and mostly because they feel uncomfortable denying them. Doing this can lead you into incurring losses because that relative of yours could be an agent of the insurance company which is targeting you in case they fall short in achieving the required target and after investing into the scheme you might miss the chance of getting a much better deal due to lack of knowledge and proper research before purchasing.
- Investment technique: Random investments in products about which you have just heard from anyone may often lead you to losses. Also, mistakenly investing in small funds or short debt funds will do you no good. Therefore, proper knowledge and research before making any investments is suggested.4. Portfolio Management: Diversification in your investment plan is of utmost importance. Investing all your money in a single company in the share market is like inviting loss for yourself. You must always invest in shares and securities from a varied array of companies so that if in case one company suffers loss then you have the option of other companies to balance the scenario and prevent you from incurring heavy losses. Also having shares of different companies in your portfolio will help you in attaining the best possible returns on your investments.
- Impatience: Patience is needed when you invest in shares or bonds of any company because certain investments are best when held for a longer duration. You cannot profit immediately; you must wait for the right and best time. Impatience is the common mistake which most investors make and thus should be avoided.
- Bad timing: Timing the markets is something which has not been achieved even by expert investors. Moreover, the timing of the market is something to be done by traders and not investors. This is a common mistake committed by investors which others should necessarily avoid. Being an expert investor, you should decide on investing in a product for its advantages and disadvantages and not by timing. Even good products fall down sometimes; it is just a matter of luck. If you are lucky enough you will get the best returns from the investments you never thought of receiving.