{"id":5629,"date":"2022-12-22T07:39:18","date_gmt":"2022-12-22T07:39:18","guid":{"rendered":"https:\/\/s9financialplanners.com\/blog\/?p=5629"},"modified":"2024-12-10T09:04:16","modified_gmt":"2024-12-10T09:04:16","slug":"stock-market-mistakes-retail-investors-avoid","status":"publish","type":"post","link":"https:\/\/s9financialplanners.com\/blog\/stock-market-mistakes-retail-investors-avoid\/","title":{"rendered":"5 stock market mistakes that retail investors should avoid"},"content":{"rendered":"

According to a recent study<\/a> of Indian Stock Markets, retail investors owned 9.7% of companies listed on NSE in December 2021. It was 8.4 % in December 2019. Since the pandemic, there has been a huge rise in Demat account holders in India. With the rise of retail investors, the chances of losing money in the stock market also have increased due to multiple reasons and mistakes made by investors.<\/p>\n

We choose to discuss this to ensure that we learn from others’ mistakes and it helps us to be aware of them.<\/p>\n

As rightly said by Napoleon –<\/p>\n

\u201cA genius is a man who can do the average thing even when everyone else around him is losing his mind\u201d<\/p><\/blockquote>\n

Let\u2019s look into some of the mistakes that a retail investor usually makes and let’s learn from them –<\/p>\n

Half knowledge is dangerous in stock market<\/h1>\n

Our basic instinct, when retail investing, is to trust professionals. For the most part, that\u2019s the right way to go about investing, but retail investors often forget to do research before making decisions related to money. We have experienced this situation with many of our clients who don\u2019t know how the whole stock market system works. With half the knowledge about the retail investing process and a desperation to make profits, they lose a lot. Not just financially but emotionally too. Knowing the meaning of terms like profit, risk, loss, and other emotional aspects attached to investing would be a much better process for making investment decisions. In the end, we must aim to be more responsible when we invest our money<\/span><\/p>\n

With this in mind, let\u2019s look into some of the mistakes that retail investors make and learn from them.<\/span><\/p>\n

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A shortcut is not possible<\/h3>\n

We can\u2019t escape the need to learn and apply our learnings when it comes to retail investing. The most common mistake that most new investors tend to make is they want to enter the stock market without the help of stock tips. Fundamental and technical research-based stock picking is a long and time-consuming process, so doing that is usually avoided by investors. Indirectly, this shows a <\/span>behavior pattern<\/span><\/a>: <\/span>the more one desires to take shortcuts toward earning money through retail investment, the faster one tends to take unclear decisions.<\/span><\/p>\n

For example, inexperienced retail investors tend to enter at the wrong time in buying the stock and then exit at an even worse time, which leads to losses. Knowing the right entry-level and exit-level can help you earn profits while buying or selling stocks.<\/span><\/p>\n

Moreover, there are many investors who always show themselves as brave trader or investor under the influence of many emotions like ego, fear, self-doubt, etc. At times we don\u2019t know what our risk capacity is and when to stop loss and walk away. So it is important to know our risk appetite and then pick the trades in the stock market. If this is done properly one can save losses up to a great extent within one\u2019s own limits.<\/span><\/p>\n

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Catching the wrong train<\/h3>\n

There is a dialogue from my favourite Bollywood actor Paresh Rawal, “To stop the train, pull the chain” but the question always arises whether it is the right train. Let me simplify this further. Investors many times tend to enter at the wrong time in buying the stock and then exit at an even worse time, which leads to losses. Knowing the right entry-level and exit-level can help you earn profits while buying or selling stocks.<\/p>\n

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It is not necessary to be brave<\/h3>\n

There are many investors who always show themselves as brave trader or investor under the influence of many emotions like Ego, fear, self-doubt, etc. At times we don\u2019t know what our risk capacity is and when to stop loss and walk away. So it is important to know our risk appetite and then pick the trades in the stock market. If this is done properly one can save losses up to a great extent within one’s own limits.<\/p>\n

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Penny stock is my favourite<\/h3>\n

Penny stocks are the most lucrative options which catch the eye of new investors in the stock market. Even Google search results are high about penny stocks.<\/p>\n

What is a penny stock?<\/h4>\n

Often, retail investors are attracted to penny stocks. Penny stocks are those stocks that can be bought and sold at a very low price, have very low market capitalization, and are usually listed on a smaller exchange. You would see most stock picks that are bought or sold are in bulk here as prices start below \u20b910 and go up to \u20b950. We need to know the two important aspects of penny stocks: they are very speculative and highly risky in nature. This happens mostly because of the following reasons:<\/span><\/p>\n