7 Common Mistakes Traders make while investing in Stock Market

Here are the 7 common mistakes traders make while investing in the stock market and ways to avoid them in future.

Lack of Investment Goals:

Before starting the investment journey, the investor should know what he or she is trying to achieve. The investor should have proper investment goals aligned in order to avoid any future discrepancies. The reason behind this is that the investor gets excited about the market trends hoping to get more profits at the start.

Lack of patience:

Expecting a stock to perform well in a day is something we all want but can't get. While investing in the stock market, it is crucial to have utter patience in order to understand the market trends. Expecting a portfolio to do something other than what it is designed to do is a calling of a disaster. This indicates that your expectations are not set right and realistic when it comes to investing in the stock market.

Trying to time the market:

Timing the market is a strategy that involves buying and selling stocks based on the expected price changes. The second most common mistake an investor makes is try to time the market. It is very challenging and difficult to time the stock market successfully. One can never determine when to get in and out both accurately and consistently while timing the stock market.

Assuming historical returns as measure for future performance:

Only relying on the historical returns for future performance is one of the horrific mistakes an investor can make. Predicting the market for long term investment is not the ideal practice and should be highly avoided. Historical data should only be analyzed in order to understand the risk indicators for an asset.

Over Diversification:

To avoid suboptimalism, over diversification of the stocks should be avoided. Diversification is a great risk management tool but when used properly and with proper analysis.

Letting emotions rule:

The saying that fear and greed rule the market is true. Just because an investment is made, an investor should not just keep on checking the ticker or the index. Even when a portfolio is up or down, an investor should not let his/her emotions take a toll on the decision-making capabilities.

Investing only in the short-term:

It is often perceived that investing in the stock market is a game of investing only for short-term. Facing any slight changes in the market trend makes the investors anxious about their position and makes them exit the market. In order to enjoy the benefits of long term investment, investors should avoid exiting the market.