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Are You Making These 3 Stock-Picking Mistakes?
Publish Date: June 12, 2019
By: Sandhya Kannan, Head – Content
Are You Making These 3 Stock-Picking Mistakes?
The share market can be a financial roller-coaster ride. So, how do you ensure steady growth? The answer is simple: Pick good stocks from the Indian stock market.
But there is no shortcut to acquiring quality stocks. And here are three stock-picking strategies that are best avoided.
Related: 5 psychological traps that you should avoid
1. Picking stocks based on free tips
The investor Peter Lynch once said, ‘If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
That’s right. There is no substitute for thorough share market research. A majority of the free tips you get may be of little value. They could even lead you in the wrong direction.
So, try not to jump to conclusions. Do your research first. If needed, consult an investment adviser who knows the nitty-gritty of Indian stock market.
Related: Stock market cycles you should know about
2. Following the big market players
You may want to invest where the big players have invested. But you can never match their risk appetite, resources, and exit strategies.
These players make big-ticket investments after considering a number of factors. Their plans may not work for you.
You can always observe and learn from the investment strategies of these big players. But don’t pick a stock blindly just because a big player has invested in it.
Related: Is negative price to earnings a bad sign for investors?
3. Picking stocks based on predictions
You may be speculating that the price of a stock will rise. But nothing is definite. The price could decline too.
A better approach is to assess the fundamentals of different stocks. Examine the company’s finances, growth prospects, management, and so on. Make your trading decision based on this information.
Investment decisions that are based on intuition could be an invitation for disaster.
Related: What is algorithmic trading?
Bottom-line
Patience is the key to consistent returns. Spend some time figuring out which stocks are good for you. It is helpful to follow financial news and conduct thorough research on your shortlisted companies.
You could even open an account with Kotak Securities. Accountholders get access to research reports, live stock market updates, and more.
Also read:
- Why stock prices move up and down
- What you can learn from the risk ratios of equities
- Shape your trading strategy with the latest research
- Place orders by phone with Call and Trade
- Importance of the cash flow statement
