Five mistakes to avoid while investing in stocks

Wednesday, July 8, 2009

Five mistakes to avoid while investing in stocks

Stock markets test a man’s temperament. If the bull is raging, you might want to go a step further and try and grab the money making opportunities on offer.

It’s perfectly all right, but then you should be careful before you invest. You might never know when the bull stops raging, you will then rue your actions.

It’s essential, therefore, to follow the basics of the stock market.

What are the five significant mistakes to avoid while you invest in stocks?

Stock markets can earn you big bucks within a short span, if only you have the right stocks in your armor.

On the other hand, you may lose thousands of dollars if you commit mistakes while picking a shoddy stock.

Here are five fundamental mistakes that you should never make while investing in stocks.

I will give a signed cheque to my broker; he will choose the right portfolio for me. How many times I hear the statement, only for the man to return and tell me that his broker invested in a shoddy stock and he now stand to lose more that 50% of his investments. Never ever leave the entire decision of choosing the stock to your broker. Collect basic information about the stock before you invest. You may certainly discuss with your broker and take his assistance, but the final decision should be yours.

You appear savvy when you say to your friends 'I do not follow the economic needle, I just invest on the growing stock'. You may be right to an extent, but the growing stock, too depends upon the economic condition of that region. You may invest when the economy grows at a healthy rate, but your stocks may fall because the economy is down and you stand to lose your investments. Therefore, you should follow the economic trend; it makes your investment safer.

I do not understand the company annual reports, and that's the reason I don't follow the reports while investing in stocks. You brag this to your friends, but analysis of stocks are prerequisite to successful investing in stocks. If you don’t analyze the stock, it could prove detrimental to your financial health in the long run.

You ask your broker to call you up and redeem the stock when the market is about to go down. This is a mistake, a busy man often commits. This man expects his broker to call him and let him know when to redeem his stocks. Instead of following the broker, if you expect your broker to call you and submit reports, you are mistaken. A broker has hundreds of clients to deal with. He may not be able to get in touch with you. Always follow the stocks to be successful in the stock market.

Never be greedy and overlook the pulse of the stock market. If you had made profits from your invested stocks, and you now have a slight inclination that markets may crash, surrender your stocks. Never be greedy and take undue risks. A slight delay in surrendering your stocks could be a massive loss for you.

The use of common sense is the norm for successful investing in stocks.

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