Common Investment Mistakes

Common Investing Mistakes

Some commonly observed investment /trading mistakes are listed below….These are considering the mindset of an average or small investor and how he reacts /make investment decisions,especially in a falling market .

1.Do not just accumulate the SAME scrip to cover loss in THAT scrip:

Eg:Consider that you bought XYZ at Rs 420 and after that the scrip is now trading at 330 levels .The market falls and the scrips goes to 280 .It makes sense to buy a little more of the Scrip at lower levels to minimize losses tomorrow.But it does not make sense to just keep averaging again and again ..upto infinity .

Alternatively you may invest a certain good percentage of your cash in another fundamentally strong scrip ,to increase the chances of maximizing your profits.

It is not necessary that you park all your money in the same scrip to cover the losses in that scrip.


2.Do no buy at all levels just because you have eyed it :

Consider that you had identified a scrip and you know that will rally soon …..But did not buy .Suddenly the scrip has rallied and you don’t know what to do .Common mistake is to buy a Higher levels ,when everybody exits and you end up in losses.

Markets are always there and corrections are always there .Fundamentally strong scrips sustain whereas the others get battered ….


3.Ask this question about your scrips :

Always ask this question to yourself before investing :

IMPORTANT :Industry Analysis,Positives & Negatives,Government Policies

a.Have you done a research on this scrip by visting various sites ,gathering company information ,analyzing the performance in last three quarters /years ??

b.Is the promoters holding (Share holding) good or just meager ??

c.Is the Promoter’s experienced in that Industry ??

d.Is the daily liquidity good (Good Volume) ???

e.Is the price reasonable compared to its peers /competitors in the industry ??

f.Does your company manufacture a sustainable commodity ??
g.Is the deamd going to increase in the coming years ??

If the answers are YES, go ahead with your investments ……..It is bound to give you Good Rewards .


4.It’s all about having PATIENCE

One of my main experience with the market is that YOU NEVER GET MONEY WHEN U WANT IT ……..

Many times you will end up in situations such as –ENDING UP IN HUGE LOSSES ,if you want to TAKE OUT CASH from the market at that time ……

Park only your SPARE MONEY for investment .Don’t think that after 1 month ,it will increase so much and I will make so much profits .


5.PROFIT BOOKING :

Advised as soon as you make reasonale profits of 20 % plus .Dont see the Profit margin ,but always see your PROFIT as a PERCENTAGE of your INVESTMENT .


6.KEEP STOPLOSSES :

50 day Average price may be kept as a good stoploss for medium to long term investment ..This may be kept as a strong Support ….Your losses will be greatly minimized by following stoplosses.

Best Regards
Ajith Kumar
pepcons@gmail.com