Common mistakes to avoid while investing in equities

Stock market investors tend to make some very common mistakes. These mistakes are easily avoidable and thereby some of the losses suffered by investors can be easily averted. Let us look at some of the most common mistakes committed by retail investors.

Betting on Tips:
Some of the investors simply rely on tips from friends, relatives and brokers and put their money based on these tips. At times, some of these tips work and investors make some money, but most of the times, these investors usually end up losing money as they become pawns in the hands of some of the market operators. So, putting money in the stock market based only on tips is a sureshot recipe for losing one’s shirt in the stock market.

Putting All the Eggs in One Basket:
It is foolhardy to put all the money in one or two stocks or in only one type of stocks. If an investor has invested all the money in just a couple of stocks, the possibility of losing the money is high if the business prospects of those companies take a downturn. To avoid this, it is absolutely essential that an investor invests in many stocks from different sectors and industries or invests in different asset classes such as debt, gold, real estate, etc. Such diversification helps mitigate market risks.

Trying to Time the Market:
This is one of the most common mistakes investors tend to make. They try to find the bottom in order to buy or try to locate the peak to sell. Finding the bottom or locating the peak is not possible even for the most seasoned investors. The crucial thing in successful investing is to remain invested in the market for the long term. This strategy takes care of the bottoms as well as the peaks and delivers superior returns over the long term.