Mark Twain once divided the world into two kinds of people: those who have seen the famous Indian monument, the Taj Mahal, and those who haven't. The same could be said about investors. There are two kinds of investors: those who know about the investment opportunities in India and those who don't. India may look like a small dot to someone in the U.S., but upon closer inspection, you will find the same things you would expect from any promising market.
The return from Markets is higher than other financial instruments:
Apart from real estates, the stock market do provide great returns if invested cautiously. SEBI has always tried to protect the retail investors. So, it takes in profit making companies only for public offering. Taking this into factor, every company that is listed has a chance of good growth over the years.
People mistake volatility for risk :
Since stock prices fluctuate, people get emotional and start worrying when prices get low and start celebrating when they get high. They never think of it as a business that they own. If then own a house as an investment, they never track the price daily. But, just the availability of a quote on a stock everyday makes most investors incapable of handling the fluctuations. This generally results in getting in and getting out at the precisely wrong time.
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Always diversify. If you see a sector booming, even then you need to diversify. There is always what if ? For eg: the issue to H1B visas hit the Indian IT stocks negatively. If a person was bullish on IT stocks and invested all the shares in IT stocks, he must have taken a hit. Similar case can be with tea stocks. The tea stocks will be in good position few quarters down the line but there is if. What if the monsoon is so bad. There is always some probability of things going bad. Diversification shall not only be with regards to stock but also with respect to industry/sector.
If you are going to do it yourself, do not follow what others say. You would not like to blame on others if it impacts negatively on your portfolio. Many individuals/brokerages like to gloat about profits but they would show less number of losses. Always have a fundamental analysis by yourself. Otherwise, invest in other instruments with less risk and less return.
Be updated:
The fundamental factor which made you invest in company may change. This will lead you the average out. Hence, you need to be updated about the market news. Be posted about your investments at least on weekly basis.
Investing beats trading: If the various researches are to be believed, people make more profits on investments than on intraday trading. Although the prospect of making great profits lure the large crowd into intraday, it is really few people who makes profit on intraday for continuous basis. Have a read on How to invest like warren Buffet?
When analyzing investing successes :
People think a good outcome means a good decision. However, this cannot be more untrue. Good decisions can have bad outcomes (a high probability event on which you bet not happening) and bad decisions can have good outcomes (low probability even on which you bet that it wont happen actually happens). Thus, one cannot deny the role of luck in the markets, especially in the short run. However, as your number of years increase in the market, the role of luck reduces as probability and actual experience should align.
This can be related with demonetization. If you look at the charts of most of the stocks, they plunged drastically after demonetization. Most of the professional investors considered it as good signal to buy the shares at attractive prices. And they gained from it just few months down the line. This means when the share price is on bull run, invest cautiously. If a bad news comes which is not fundamental, it is time to buy more shares of that company.
Stock markets are cyclical in nature but since public memory is very short: People think that current trend will continue forever (trees will grow to the sky), which is the cause of disaster in most cases. At the peaks and troughs, this feeling (of trend continuance) is at the maximum level.
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