Investing in equities to build an equity portfolio for wealth growth has been the standard in recent years. To make a good return from the markets, we must have both – knowledge and patience. In addition to this we must also be disciplined, otherwise, all the earned profit will go in negative. These are the following ways that can ruin our portfolio returns:
- Power of Compounding
- Ignoring the real value of the company
- Emotionally attachment
- The right time for Entry and Exit
- Value Stock
- Power of Compounding: –
Compounding has a magical power. However, its effects are visible only over time. We can expand our money eight times in ten years and sixteen times in twenty years only if the investment can compound at 15%. The capacity to invest with a long-term vision is one of the most typical characteristics of successful stock investors. Predicting short-term market fluctuations is impossible.
Stock Market is excellent for a long-term investment. Recently it was said by a known stock guru “I’m amazed because so many are surprised that just 1% of active traders make more than bank fixed deposits over 3 years’ timeframe. Active trading is like running a business, only a small percentage succeed.”
- Ignoring the Real Value of a Company: –
Before investing in a certain stock, it’s important to understand the company’s finances, such as its Cash Flow, Operational and Financial costs, and so on. Many investors overlook this truth and invest blindly. Given the present market environment, it is prudent to analyze all relevant factors before making a decision.
Markets never stick to the guidelines and are often overvalued or undervalued at times, but in the long run, they come back to their core principles.
- Emotional Attachment: –
The act of emotionally associating with your investments is known as “anchoring.” Investing in the stock market with emotions into stocks is totally a bad idea since it inhibits you from comprehending the stock’s initial position. One cannot presume that a given stock will always generate positive returns and will never go negative.
- The Right Time for Entry and Exit: –
When it comes to investing, investors need to know when to give up. This is, however a simple thing to say but a challenging thing to execute in practice. Even when our stocks are failing but we are not ready to sell them because maybe we are personally biased on those particular stocks.
In the end, this will result in ruining the portfolio return. The only way to make real money is to quit a losing portfolio.
- Value Stock: –
Value stocks are uncommon in a bull market. It takes a lot of effort to find them. Some investors use a simple method to find stocks to trade that have reached 52-week or all-time lows. If it were so easy to make money! Some stocks trade at low prices because they deserve it. As a result, investors are more likely to purchase a stock that has reached a low point.
The stock continues to go down, and they continue to purchase, eventually doubling their holdings. So, before investing in any stock you should aware about why a particular is stock is going down or up.
Before investing in any stocks, we should be breaking these bad habits. Before making an investment, it’s important to thoroughly research and understand what you’re investing in. We should take the time to properly read the key paperwork, such as the investor presentations and annual reports. It is also worth applying some fundamental and technical analysis before making a decision. Keeping up-to-date with investment news may also be helpful, as a good investment today may not be so in the future.
Author – Vivek Kaushik
Disclaimer – This is an informative and educative piece for creating awareness. Nothing in this note be considered as investment advice.
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