It is wonderful that you have decided to get started with your investment journey in the stock market. Today I will highlight some of the common mistakes in the stock market from a wonderful book STOCK TO RICHES by Parag Parikh.
But remember there are no shortcuts in this path. During your journey as an investor, you will definitely learn a lot about market and lot of things. All this learning will help you to become a smart investor.
Remember, as becoming a doctor, engineer or learning any other occupation takes time so is the investment. You cannot become a successful investor overnight. Becoming an investor is your choice but being a successful investor through an act of discipline.
Today I will be sharing few insights from a recent book which I read.
- Obvious prospects for physical growth in a business do not translate into obvious profits for an investor.
- People curse markets to be ruthless and wealth destroyer etc. But it is not always the case.
- It matters that which company shares are you going to buy but what matters most is what price you paid for it to buy.
- You should keep individual stock exposure to around 10% and an industry exposure to 20%. This will help in getting you more profits in long term.
- Before starting any investment write down your vision for your portfolio.
- Whenever you invest in any stock you should write the rationale behind each investment. This could also be applicable to mutual funds.
- If you are deciding not to do anything that also is a decision. Sometimes we decide to sell a stock which has appreciated in value but later on not acting on our decision is also a decision.
- Never get married to stocks or any type of investment vehicles. Every investment vehicles have a purpose and once that is achieved you should sell that vehicle.
- Never get carried away with free lunches in stocks and AGM (annual general meetings). Usually, companies go for share split or give bonus shares to their shareholder to achieve their purpose. Everyone usually become overwhelmed with this cause and start acting regards to this.
- Beauty may lie in the eye of the beholder but value often lies in the eyes of buyers.
- Past performance is no guarantee for future performance.
Read: How to make money work for you?