Here is what first-time investors should avoid while investing

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February 25, 2021 4:54 PM

Most young investors are usually attracted to the equity markets. However, risk and return go hand in hand and stock markets are risky and complicated.

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Once someone starts earning, the need for saving and investing some money for future financial goals also arises. However, when it comes to investing, most young people remain clueless.

There are various products that can be looked at for investing such as mutual funds, debts, equities, fixed deposits, physical gold, real estate and so on. All of these products come with different levels of risks and returns attached to them. Experts say one should diversify one’s portfolio to reduce the risks and optimize gains.

Everyone wants to earn sky-high returns in the shortest time possible. Hence, most young investors are usually attracted to the equity markets. Risk and return go hand in hand and stock markets are risky and complicated. Traditionally, people believed that it is akin to gambling and hesitated to invest in the stock market.

Vineet Patawari, Co-founder and CEO, Stockedge, says, “The scenario has, however, changed over time and it has been realized that taking calculated risks after proper research is actually beneficial.”

Here are a few things beginners in the stock markets should be aware of to avoid making losses.

Fall prey to tips – If you genuinely want to invest in equity markets then you must save yourself from blindly following the investment tips given by random people. Experts say this is where most people make the mistake. Thousands have lost their hard-earned money by naively following tips. Hence, no matter how lucrative the tip looks, you should refrain from investing unless you research it properly.

Invest all at once – For new investors, stock markets are a new avenue and the markets are unpredictable. Patawari says, “As a beginner, invest cautiously and in small amounts. If your corpus is Rs 1 lakh, then start by investing say Rs 10,000 and gradually scale it up. This way you will have time to learn from your mistakes and rectify them.”

Be over-smart – Industry experts say, no matter how many books or blogs one reads on stock markets, the uncertainty around it persists. Patawari says, “Don’t be under the bubble that you know it all. Having knowledge helps in imparting skills learnt but is not enough.”

Variable Investment horizon – Be sure of your investment horizon and make allocations accordingly. It may happen that a stock fluctuates a lot in the short term but eventually gives good returns in the long term. In such situations, it is suggested not to sell off the stocks fearing losses and staying true to one’s goals.

Playing with multiple strategies – Most investors, experts say, have the habit of varying strategies. This might not prove to be fruitful. Patawari says, “In fact, most times they are very close to making profits but change strategies and have to start again.”

The risks in equity markets are equally high as the rewards earned. The entire idea is to identify the correct entry and exit time of the market and book profits. Experts say this is only possible by proper research and analysis of the prospects of the company and by adopting tried and tested strategies.

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