Feb 22, 2006|
Markets: What's your investing habit?
The markets moved into higher territories yesterday - again! However, this time around, the feat was not achieved easily and a fair amount of volatility was witnessed. While we reckon the volatility to continue going forward, one thing is for sure that gone are the days of the one-way movement that was seen in 2005. In this write-up, we try and caution investors against some investing habits that can cause a dent in their portfolio.
Investing with a short-term view: This is the most common mistake an investor makes, as he/she is too focused on quarterly trends and thus, clearly misses out the larger picture. This short-term mentality is a bane in the long term, as research shows that the shorter the time horizon of investments, the more are the chances of losing money and the longer the time horizon, the lesser the chances of losing money. This is especially true with respect to investing in equities.
One must remember that famed and successful investors like Warren Buffet did not become rich overnight or by indulging into trades settled within a fortnight or a month. Also, with a long-term horizon, volatility is easily eliminated.
A short-term view breeds speculation: A focus on the short term has created an atmosphere that favors speculation rather than investing, and individuals are as susceptible to it as professional investment managers. Speculation is like trying to forecast the psychology of the market. One can never 'buy at the lows and sell at the highs', which is not as easy to do as it sounds. Instead, take a longer-term view of any stock and it becomes much easier to ride out the crests and troughs over a period of time. As we mentioned above, the longer the time horizon for investing in equities, the greater the chances of making money.
Not studying companies before investing: Since an investor has access to loads of information, choosing a security in these markets has become a difficult task. Also, when to buy, when to sell and when to do neither has become incredibly complex. People have come up with new tools like techno-fundamentals in order to maximise gains. But in our view, these shortcuts are just new innovative ways by brokerage houses in order to woo clients. Before investing in a stock, an investor should always study the companies and their business models in order to get a holistic view of its growth prospects in future and then take a call.
In our view, one should be a disciplined investor. Although it is easier said than done, once an investor has bought a stock, he should at least make his own calculations and keep a target in mind, as greed has a nasty habit of overcoming oneself and he/she might be stuck with the stock in anticipation of a higher price. Every investor has a different risk-return profile and thus, what suits one might not suit the other.
Although, we agree that there is no foolproof way of making money in the markets, investing through research is better than relying on short term tips and getting happy by making a 5% gain in a week and missing out a 25% gain possible in a year. Not to mention the fact that, rather than the 'investor', the broker for sure is getting rich! Thus, safety holds the ultimate key in investing. After all, no one wants to get caught on the wrong foot.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Aug 16, 2017
And what it has in common with beating the stock market too.
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Aug 14, 2017
Last week's correction is making a number of Super Investor stocks look a lot more attractive...
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 4, 2017
The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407