Friends, in today’s article, we will discuss those mistakes because they are usually done by ordinary investors or traders.
Buying if particular stock falls
Most of us start buying the falling stock thinking that we are getting it at a cheaper price . We don’t do research on why that stock is falling, maybe it goes further down after we buy it, we should do research on why that stock is falling Buying a falling stock is like holding a falling knife. If you invest in such a stock, it will completely topple the performance of your portfolio . If a stock falls by 20% from your purchase, then this stock will have to give a return of 25% to reach the cost of your purchase, if this stock falls by 25%, then it will have to give a return of 33% to reach the cost of the purchase Similarly, if a stock falls 50% from your purchase, then it will have to give a hundred percent return to come up to the cast, which is a very challenging task, so do not make the mistake of buying a falling stock.
Not booking losses
Sometimes the reason for the fall of some stocks in our portfolio is the fundamentals of that stock,. then some stocks fall only if the whole market is falling. we should study all the stocks once again if a company is fundamentally weak and we find that its chances of recovery are very low or it is going to take a very long time, then we should book a loss in the company immediately because otherwise if there is a very big fall, we may have to suffer a lot of losses. So it’s very bad habits not to book loss.
Afraid of buying at higher price
If you come to read the chart in the stock market, then you must have also learned the term “breakout.” If a stock is going up with a very large volume, then it is going to give a breakout. In such a situation, we are unable to buy it because we think that we will buy this stock only when it is available at a cheaper price. Suppose a stock has given a breakout at ₹300 and that stock has gone up to ₹330. At a price of ₹300, we did not buy it because we thought we would buy this stock only when it comes around ₹290. If a true breakout is given in this stock, then it will never come to ₹290. Thus the investor misses the opportunity.
Generally, the stock with low PE is considered very attractive for buying, but in reality it is not so, if the company’s future growth prospects are very low, then that company will not perform very well because this is the stock market, here the stock price of a company with ₹50 can be ₹5 and the stock price of a company with ₹800 can also go up to ₹3000.
Buy only by looking at the low PE of the stock for investment
Many times we buy only those stocks in the stock market whose P E ratio is very low I want to tell the investors that in this way it can be quite fatal for you to take the stock by seeing only P E.
Things to Consider Before Buying Low-PE Stock:
The basic structure of the company:
Analyse the financial health of the company, such as revenue growth, profit margins, debt, and cash flow. A comparison of the industry: Compare the company’s PE to the average PE of its industry. The definition of “low” PE can be different depending on the industry.
Prospects for growth:
Is there potential for growth in the company in the future? Companies with low PE that are less likely to grow can be risky.
Other metrics:
Look at PE as well as other ratios such as P / B (price-to-book) ROE (return on equity) and dividend yield.
The state of the market:
Low PE stocks can be more risky in economic downturns or market volatility
When will it be safe?
If the basic position of the company is strong, there is a good position in the industry, and there is a possibility of growth in the future. If the low PE is due to temporary market inefficiency and the fundamentals of the company are solid. If you are a long-term investor and have confidence in the long-term prospects of the company.
Advice:
Do an in-depth research before buying a low PE stock. Don’t just rely on the PE ratio. Analyse the company’s balance sheet, quality of management, and industry status.
Take help of tips
Investors often fall for tips (such as stock tips, “This stock will bounce,” etc.) because they make mistakes because of their desire to get rich quick, lack of knowledge, or emotional decisions. Here’s how and why investors get stuck based on tips, as well as some common causes and scenarios:
1. Why do investments get stuck without superstition and research?
Investors rely on “tips” without any analysis, such as advice from friends, relatives, TV channels, social media, or Telegram / WhatsApp groups. Example: Putting money on tips like “XYZ stock will jump 50% next week” without looking at the company’s fundamentals or technical analysis. Results: The stock falls when the tips are wrong, and the investor’s money sinks. Many times those giving tips have already sold the stock at a high price (pump and dump scheme).
2. What are pump and dump schemes?
Some unscrupulous people or groups spread tips in small or less liquid stocks (penny stocks), which increases their demand and price. Investors buy stocks at high prices due to FOMO (Fear of Missing Out). Tipsmen sell their shares at a high price, after which the price of the stock falls. Example: Spreading rumours like “ABC stock will go from Rs 10 to Rs 50” on Telegram. Results: Investors make a loss by buying at a higher price when the stock returns to its original price.
3. Why do you want to get rich quick?
Tips often promise to “create wealth faster,” attracting new or experienced investors. Investors invest all their capital in a stock without assessing the risk. Results: Tips turn out to be wrong due to uncertainty in the stock market, and investors incur huge losses. Sometimes the entire investment sinks, especially in derivatives (F & O).
4. Why do we get stuck with lack of information and relying on wrong sources?
Many investors rely on tips without understanding the company’s fundamentals (balance sheet, income, debt) or the state of the industry. They take tips from unknown “experts” or fake profiles on social media. Example: Someone on X or YouTube claims “guaranteed returns,” and investors follow without checking. Results: Investing on the basis of wrong or outdated information leads to losses.
5. How are emotional decisions and herd mentality trapped?
Investors invest by seeing others follow the tips and thinking “all is well if you buy.” Loss of rational thinking due to greed (when the stock is rising) or fear (when the stock is falling). Results: When the market slows down, such investors may be forced to sell at a loss. 6. How are fake news / fraudulent schemes trapped? Some fake advisors or companies ask investors for money for “secret tips.” Investors invest their money on unauthorised brokers or websites, which later disappear. Example: Offers like “Join our premium group by paying a fee of Rs 10,000.” Results: Investors not only lose money on tips, but can also lose a large portion of their investment.
Bad selling approach
The Bad Approaches to Selling Stocks
Emotional decision making
Selling stock based on fear, greed, or panic.
For example, panic selling during a market downturn or quickly selling a rapidly rising stock.
Selling in panic can cause investors to sell at a loss, while the stock can recover later. Selling early in greed can lose the opportunity for future profits. Example: Suppose, an investor bought XYZ stock for ₹100. Due to a 10% drop in the market, he gets scared and sells at ₹80. Later the stock goes up to ₹150.
Selling on tips or rumours
Selling stocks based on tips from social media, friends, or unreliable sources.
Tips are often wrong or misleading, such as “this stock will fall now.” This leads investors to sell at the wrong time. Some people spread rumours under the “pump and dump” scheme, causing investors to sell at the wrong time. Example: A post on X says, “ABC stock will crash now! “And the investor sells without checking, while the fundamentals of the company are strong.
Selling without a goal or strategy.
Selling a stock without a clear goal, stop loss, or profit target.
Investors tend to sell in uncertainty, causing them to either sell too quickly or wait too long. This can lead to an increase in profits or decrease in losses. Example: An investor bought the stock for ₹100 and it goes up to ₹150, but without a target he keeps waiting. Later the stock falls to ₹80.
Responding to market volatility
Selling in haste on the basis of small market fluctuations or news. Short-term volatility is normal in the stock market. Reacting to this can lead to loss of long-term profits. Stocks of strong companies can recover after a temporary decline. Example: A good company’s stock falls 5% due to some negative news (e.g. quarterly results lower than expected), and the investor immediately sells. Later the stock recovers and touches new highs.
Not able to buy new stocks
Many people do not look for new stocks while investing in the stock market, maybe they invest only in the stock of Nifty 50, invest only in some of their familiar stocks, this notion is absolutely wrong in stock market investment because the new fruits give more juice, so we should keep looking for new stocks so that we can continue our investment journey
Conclusion
Hope you all liked this article. The stock market is not a method to get rich overnight, so in today’s article, what kind of discipline you need in stock market investment. There has been more emphasis on It is expected that investors will benefit greatly from this.