in present days, depending on a single source of income might be risky due to uncertain situations like covid-19 and so on, so investing in stocks could helps to work as a second source of income from where you can get passive income through the returns you can receive on your initial investment.
while making stock market as a second source of income, most of the beginners used to undertake some practices which cause them a huge losses and they ended up loosing their initial investment. so in this article you can get to know about why beginners should stop to invest in stocks and some of the aspects related to it.
why beginners should stop to invest in stocks?
habits of bad investors.
top 5 things to avoid while investing.
value investing.
the bottom line.
why beginners should stop to invest in stocks?
investing in stock market would be a hassle thing for a beginner untill he gains the knowledge about stocks, so the top 5 reasons for which a beginner must stop investing in stocks are.
- risk bearing capability.
risk bearing capability is the major factor for which a beginner should stop to invest in stocks, mostly when a beginner start to invest in stocks, the first perspective of that beginner is to make money or generate a passive source of income. but due to market fluctuations sometimes they may also incur losses.
here, they were not aware about the companies fundamentals and financials properly, hence when companies got suddenly into huge debt, the beginner investors keeps on holding the positions due to lack of information and ended up selling the stocks at lower price and bear huge losses. in this kind of situation they bear huge risk as they buy the stocks of companies at higher prices and sell them at undervalued price.
- incomplete market knowledge.
incomplete market knowledge is also a major factor for which a beginner investor should stop investing in stocks. here, the lack of knowledge would regards to any sort of market aspects i.e. the company stocks, the stock broker, the company's financials and fundamentals and so on. while investing in stocks a beginner must think about all these aspects to face off all the situations or consequences that may arise while investing.
gaining the basic knowledge before investing in stocks is always preferred by the successful investors to the beginners. this knowledge includes how to select good stocks? how to read company's financials. the fees and charges levied by your stock brokers, etc.
- investing excessive funds.
investing excessive funds in stock market is a common mistake that most of the beginners used to do and for which they should stop to invest in stocks market. after making the first profit from the stocks they get over-confident about the market and add more funds by just thinking of making more profit out of it.
investing excessive funds in a single stocks again increases the risks, however allocating the funds in diversified set of stocks could be a best way through which you can also be able to manage the excessive funds investment, as the diversification factor helps to minimizes the risks.
- absence of professionalism.
absence of professionalism refers to the absence of strategy or the absence of reason without which a beginner must stop to invest in stock market. as it is preferred by many successful investors that without a strategy or a reason, being consistent is difficult for a beginner.
so building a strategy to achieve the goals and freedom based on age and finance sequence must be necessary for a beginner. elsewhere a beginner must set a reason like financial freedom, achieve goals, buying a luxury life, etc would also helps him. so, after setting these things he can get to start invest in stocks again.
- taxes and charges.
when an investor or a trader invest in stocks or redeeming funds from stocks some taxes and charges would be levied to him by his stock broker. this charges sometimes vary from broker to broker, so most of brokers used to charge high amount on the transactions made from their platforms, so without having complete knowledge about the charges levied by the broker it would be preferred to investors to stop invest in stocks market.
nowadays, there are many discount stock brokers available in the market who charge very low fees or even no fees for providing trading facilities in stock market.
habits of bad investor.
there are various kind of investors and traders available in stock market, it includes intraday traders, swing traders and investors, momentum traders, ethical investors, etc. this investors performs various practices to earn higher profits from stock market, but on the other hand there are some investors also available in the market who used to undertake unethical activities to gain higher returns. however it ended up with the loosing of funds for them as well.
the major bad habit of an investor is to follow un-analyzed tips that they come to know from some social media platforms, it is one of the common mistake that also a new investor do in the stock market. however rather than believing on social media it would always been recommended to search good stocks by ourselves.
other than following bad tips, practicing speculation is also a bad habit of an investor, which is commonly found in beginners who started their investing journey, after making their first investment if they see they got profit on the same day, they change their route from the path of investing to the path of trading. in search of making money fast they used to left the initial reason about why they actually started to invest in stocks. so leaving these unethical investing things or bad habits helps to survive in stock market and also helps to actually create a wealth out of it.
top 5 things to avoid while investing.
there are various things that an investor must avoid while making investing decisions, so these are the top 5 things that a beginner must avoid while invest in stocks market.
un-analyzed tips.
While investing in stocks a beginner must avoid un-analyzed tips that he founds on some social media platforms. Because these tips are not analyzed and don't have a base source on which basis they were recommended. however sometimes it provide profit to the investors, but it is not necessary that every recommendation would become true and it is one of the major cause for which most of the beginners loose their money in stock market.
rather than following others recommended stocks selecting a stock by yourself would be a good preference, because while choosing a stock you know why you choose it, what would be it's future prospects, its company financials, it's growth rate and so on.
trading.
trading your funds in stock market is a sign of bad investor, the major aim aim of these investor is to make higher profit as soon as possible and in search of that they use to loose their money without getting aware. it is also a bad thing that a beginner must avoid while starting his investment journey, however trading also sometimes helps to make money but it won't work in long run. as it is not necessary that a trader will make profit all the times from the market.
according to some successful investors trading your funds in the stocks volatility would always be a bad decision, as it is one of the best way to loose your money.
speculation.
speculation is somewhat similar to trading but also something more than the trading. in trading part a beginner or an intermediate tries to hold the positions if they see potential in the stocks that it might grow a bit further however it ended up loosing the profit. but in speculation the trader can immediately sell the positions even if he were getting very minor profits.
while doing this unethical practices the traders were not actually making the profits as they also got charged by their stock brokers for the buying and selling transactions
high charges broker.
as a beginner while starting the investment journey it would be recommended to select a discounted stock broker for the beginners, because there are many stock brokers available in the market who provides a huge varieties of features and for which they used to charge a huge amount of brokerages an rather than that they also levy some hidden charges to their investors.
so invest in stocks market through a discounted stock broker and avoiding a high charging broker would be a good thing for the investors.
copy trading.
copy trading is now a very trendy which peoples used to follow while trading in stocks however it is not necessary that even after copying some successful traders you can get to earn higher returns. as these traders used to invest a huge amount on leverage on which they can receive returns and if they face some sort of losses then also the minimum amount they invested will get lost which don't put a huge impact on these traders.
even if after closing the deals in profit, these copy traders used to charge a particular percent of profit from the investors who copied their trading pattern and so as for the losses.
value investing.
value investing tips justify all those practices that you may consider while investing in stocks market. these things helps to create actual wealth these thing includes various aspects, some of them are holding your stock positions for long term, basic analysis before investing in stocks, believing in your stock selections, following the tips by successful investors and not by the traders. this things helps a beginner to be a great investor.
according to a great investor "warren buffet", "if you invest in stocks by analyzing it properly then the perfect time to sell that stock is almost never". this sentence dedicates that if you invest by making proper analysis the you just have to keep faith in yourself and believe in your selection and hold the positions for a very decades.
the bottom line.
here the bottom line of the article is that a beginner or any investor must gain atleast basic knowledge before start to invest in stocks as it helps him to save his lots of money and efforts. and apart from that by avoiding unnecessary thing he must follow ethical way of investing which is actually practiced by successful investors which might also helps the beginner investors.
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