Mistakes to avoid while investing in Indian share market

A thrilling experience might arise from investing in the stock market. These days, a lot of Indians are using the stock market to increase their money and safeguard their financial future. But even the most passionate investors might lose their way if they don’t avoid the many traps that abound on the road to successful investment. You’ll look at five typical blunders investors make when they enter the Indian share market in this post. You may considerably raise the likelihood that you will succeed in your investing objectives by being aware of as well as avoiding these mistakes.

1.      Not having clear goals

This means that it is very important for you to have some goals in mind as to what you expect to gain from your investments. New investors are usually lured by high returns without identifying their financial objectives, time frame, and capacity to bear risks. This often results in making random decisions based on trends, rather than on a well thought out plan. When setting foot in the markets, know whether your aim is to construct a corpus for retirement, save for a big purchase or generate extra income. This will assist in the identification of right investment opportunities that meet the intended objectives. 

2.      Not researching companies thoroughly

People should never invest in companies that they have little knowledge of or those they have doubts about. A certain amount of homework is required before investing someone’s hard earned cash, the basic thing that must be clearly done is a review of this company’s balance sheet, its operational model, managerial integrity, future potential etc. For this, it would be necessary to read through the company’s annual report, analyst’s report, business journals or newspapers. Although past performance does not necessarily dictate future performance, using financial figures can also provide information about management capacity and results in different periods of business cycles.

3.      Trying to Time the Market

That makes it difficult for the most experienced investors to predict movement in the market. Forecasting the stock market bottom or its peak is almost an illusion in the real world. Therefore, it is not wise to try and buy at the right time but to spread the buying process mechanically over some time. This averaging ensures you do not invest all your money in the market at highs, this is because the highs are usually accompanied by high risk. It also enables you to buy at the lows when the overall average cost per stock is low. Proper asset allocation in line with your objectives together with rebalancing from time to time also assists in controlling risks that come with market timing of volatility. 

4.      Lacking patience

Share market investing bears much patience because most of the share prices exhibit a fluctuating nature in the short term but, in the long term, the prices of the shares rise. However, the problem is many investors are impatient, constantly follow their stocks, and get restless whenever markets go down which leads to irrational actions such as selling stocks early or halting SIPs. This has a negative effect on your returns. It is important to bear in mind that if the investor wishes to build long-term wealth through equities, it requires time and patience to stick to the long-term strategy and avoid being swayed by the fluctuations in the market.

5.      Overtrading

Since trading costs cut into investment profits, over trading has to be eschewed. The market noise affects investors by making them active traders who make transactions at the wrong time, buying at higher prices and selling at lower prices. This erodes portfolio gains. Conversely, holding stocks with a long-term outlook or the research on the selected companies is beneficial. In particular, frequent buying and selling should not occur if there are no valid reasons for that.

Conclusion

Avoiding these mistakes you’ll trade better. So, know what you want to achieve with your investments, do a lot of homework on your choices, think long-term, enter the market systematically, do not try to time the bull and bear market and finally, do not frequently change your stocks. If you follow these simple principles and avoid these mistakes, then you will be equipped to become a successful equity investor.