You must have listen the success stories of how investor has made 1 crore from small chunk of money, but no one talks about the losses which cost people selling their houses, jewellery, etc.
Rather than what to do, knowing what not to do is important.
Hence, How not to lose money in the stock market is the thing which every individual should look up to.
In order to create sustainable wealth from market one must have to avoid the following points.
1. Doing Speculation
Remember every time market has some favourite stock which gets lot of publicity.
As a result, many people get attracted to so called hottest stock in the market and end up buying in FOMO.
Remember there will always be adequate opportunities to buy. After covid we witness raining of IPO’s in the market.
As most of the IPO’s were giving extraordinary returns quickly so, people started applying for every IPO in greed of earning money without learning the fundamentals of the company, and respecting it’s valuations.
2. Dearth of Patience
Almost every investor will agree with the fact that Patience is most important in the world of investing.
“NO matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant” – Warren Buffet.
Above quote of legendary investor clearly point out the significance of Patience in the life of investor.
All successful investors are successful because they just invest in fundamentally strong companies and then sit and wait patiently.
Let the compounding show its magic. As the time passes you will earn more money than you think.
You will not only make interest on your initial investment but also on the interest you get.
3. Try to time the market.
Trying to time the market is the worst thing any investor can do.
They say only two people can determine whether the stock market will go up or down one is God and other is a Liar.
Lots of so-called Investment pundits try to time the market but most of the times they fail terribly and can’t even outperform the Index.
The historical data of Nifty shows that when you invest for more than 10 years then your chances of losing money decreases substantially.
Investors lose lots of money in predicting the next crash. To get maximum returns one has to stay invested in every season.
4. Sell When everyone is panicking
Volatility is an integral part of the stock market. If you think you can earn steady returns from the market, then boss put your money in Fixed Deposit and enjoy the decent returns a year.
Periodic correction is totally normal, in bear market you may get 0 or even negative returns for several years. But in the long term you will earn enough returns to beat the inflation.
Retail investors make the common mistake of buying at high and sell at the low due to panic.
In fact, bear market is best time to invest as everything is available at cheap price.
5. Not diversifying the portfolio
We often heard about not to invest in a single stock. Because some things are just not in our hand.
No matter how extensive research you did, any unexpected ocassion like Covid-19 can put your hard-earned money in danger.
Sometimes company performs different from your expectations. So, it is always advised that one should have a diversified portfolio.
Not just diversified stocks but also diversified sectors. It is advised to have minimum 10 to 15 stocks.
If You follow all of these rules of basic of investing then chances of losing in money in stock market decreases.
If you gain some knowledge then please let me know in comment section, how do you make sure to decrease the chances of not losing money in stock market?