Stock markets fluctuate over the time. The biggest mistakes happen when markets are doing well.
Sometimes making an ill decision move may lead to the serious negative impact and investors end up losing a lot of money. It is advisable to all investors to think as a prudent investor while investing, also you can take advise of our Research Analysts of Investelite Research.
Several reasons accompany for the downfall and may effect on your performance while investing in stock markets. It may happen with newbie investors, amateur investors who usually bets without understanding, who discontinue SIP (Systematic Plan Investment) or who in over emotions ruined their portfolio.
Here are some experiences of common mistakes traders do and their bad move turn into a big curse
1. Stick to SIP: Many of the investors start their investment with SIP to some extent. It has been observed that they stick to 12-18 months. Due to less improvement in performance at encouraging level, they stop to follow SIP which is the bigger mistake. Due to not stick to the SIP discipline many people have under performed the benchmark by a wide margin.
It has been marked by investors who continue their SIP irrespective of market movements is likely to make more money than one who lets market sentiments affect their decision.
2. Rebalance the portfolio: Many people fail to balance their portfolio by over diversifying their portfolio. Sometimes, individual investors usually bet big on a few stocks. Diversification is essential but beyond a point, it will not lessen the risk any further. You will find it tough to monitor a large number of stocks.
Rebalance your portfolio if you find your investment strategy in the red
3. Restore the initial asset allocation: Many people do not follow asset allocation. As the returns from different classes may vary and investors suffered from loss.
Experts suggest that asset allocation holds the key to wealth creation and should be followed like a religion.”Returns may be volatile but Restore helps you lower your risk“.Rebalancing restores the portfolio to the original asset allocation, thereby controlling the risk and the high returns it will generate.
4. Interest Rates fluctuation: With stock market volatility, both short term and long term interest rates have fallen precipitously. Rising rates usually often been a negative influence on stock prices and may lead to a loss while trading.
This is primarily due to the increased cost of capital that companies must bear when rates rise and the potential negative effect on corporate earnings. So, while rising interest rates are a risk for bondholders, they can also risk for stock investors.
So better to do the deep study to prevent interest rate fluctuation.
5. Control on Behavioral mind: This is the point which is linked to all other points as mentioned above.When a trade goes right and you make money and profit and in that case, you feel positive and confident of doing well. The mind releases dopamine which is addictive and makes people feel positive and confident. The bigger the gain and reward the more dopamine released. It pushed the investors in a cunning cycle which may future lead disappointment.
Logical investors will overcome this emotional biases and focus on to reduce the risk and to gain high return with implementing an overall right strategy. Try to minimize your small mistakes so as not convert it into blundered.
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