How to make money in stocks

Investors are making the same mistakes since the dawn of modern markets. And it’s expected that it will be repeated in years to come. However, you can avoid these mistakes by becoming aware of these types of mistakes and error and considerably boost your chances to make money in stocks.

Some of the mistakes are as follows:

No Planning

As the old saying, failing to plan is planning to fail. It is the most important thing to make money in stocks.

Have an investment plan that suits you and addresses the following:

  • Goals- Find out, what are you trying to achieve. Accumulating Rs.10,00,000 for your child’s education or Rs.2,00,00,000 for your retirement at age 60 are some of proper goals.
  • Risks – What are the risks which are relevant to your portfolio and to you as well.
  • Diversification – Allocating your money to various asset classes is the first step of diversification.

Too Much Attention to Financial News and Newsletters

Most probably there is nothing on news shows which forecast financial analysis. Such financial news show won’t be helping you achieve your goals.

Try to think about it – if anyone is having a really profitable trading advice or any stock tips or some secret formula to make huge money, would they sell it for Rs.2000 per month or blab it on TV for free? Do not spend your valuable time on watching such financial news shows on TV or on reading newsletters rather than spare your time on creating your personal investment plan to make money in stocks.

Overconfidence in the Ability of Managers

There is no stable way to select in advance that the managers will outperform. Most of the time, the Investors misplace overconfidence by selecting outperforming managers which directly leads to investment mistake.

Chasing Performance

There are many investors who select strategies, funds, asset classes and managers on the basis of recent strong performance. If a particular strategy, asset class or fund has done exceptionally well for two or three years, one thing we know with certainty: we should have invested two or three years back. Now, though, the specific cycle that led to this great performance may be moving towards its end. Do not change or modify your investment plan instead stick with your plan and rebalance.

The Bottom Line

Investors, who consider and avoid these above common investment mistakes, give themselves a great chance in meeting their investment objectives and goals. Most of the investment tips and solutions mentioned above are not that really exciting, and they might not make a great cocktail party conversation. However, they are expected to be profitable in long run.