While selecting the right stocks is one part of your investment process, the other, equally important part is to avoid making mistakes that will result in your investments losing value, or worse, converting into losses.
Stubbornly holding on and rationalizing that, ‘My losses are very small and reasonable. The price will rise, I’m sure!’
Buying a stock whose price is falling with a belief that, ‘I am buying cheap!’
Averaging down rather than up, thinking that, ‘The price is falling; I’ll buy more to reduce my cost!’
Buying large amounts of low priced stocks. It’s preferable to buy small amounts of higher priced stocks.
Trying to make a quick and easy buck from the stock markets.
Following rumours, tips, stock market opinions aired on TV
Investing in poor-quality stocks just because they are available at a low price-earning (PE) or because of dividends
Using flawed stock selection criteria; not knowing what to look for in a successful company
Investing in companies just because you are familiar with the name.
Not being able to read stock charts
Afraid of buying stocks that are rising and making new highs.
Selling too quickly to book small profits instead of holding till the stock price trend turns downwards.
Holding on to losing stocks.
Giving too much importance to tax, brokerage and other trading costs.
Speculating heavily in futures because you think you can make large profits quickly.