8 Deadly Sins of Investing

8 Deadly Sins of Investing

1. Overlooking Fundamentals
In a haste to make a quick buck from the market, retail investors tend to overlook the fundamentals of the company they're planning to invest in.

2. Cheap, yet expensive
A successful investor looks for bargain stocks-the ones which are available for prices lower than their worth and have a strong growth potential.

3. Myopic Vision
Stock prices fluctuate wildly over short periods. Due to the turbulent nature of stock markets, it is difficult to profit in short time periods.

4. Ignoring a Portfolio
The economic environment and market scenario are very dynamic. Apart from global and local policies and macroeconomic factors, there can also be changes in company strategies or management.

5. Unwillingness to Book Losses
Investors eagerly cash out small profits on retail investments, but they are often unwilling to book losses on stocks that are sinking. Even when stock prices keep declining, they continue to hold on in the hope that the stock will bounce back and turn profitable sometime. This often results in bigger losses for the investor.

6. Entry at Peaks, Exits at Lows
The stock market always overreacts to news, be it while rising or falling. Successful investors always base their investment decisions on a shares' intrinsic value and hunt for bargain stocks. They will buy shares of a company with strong fundamentals when it's beaten in the market and sell when prices surge.

7. Following Tips
If you try to find trading tips on the Internet, you will get a large number of websites and blogs that offer you free advice. Don't take the advice on these sites as gospel. It's equally dangerous to buy shares because a friend told you that "its price is going to double in six months". Stock tips by analysts published in newspapers or aired on television should also be subjected to scrutiny. Always perform due diligence before placing an order with your broker.

8. Allowing your Broker to Trade
Unscrupulous brokers often use this opportunity to misuse clients' money.
Brokers don't get a commission on the profit you earn, but get paid for trade volume. There have been cases of brokers using investor money for intra-day trading without investors' consent. When you get a statement from your brokerage house, you might see your portfolio running losses with a huge amount paid as brokerage.