Many investors fall into the trap of wanting to invest more in a falling market. Many individuals, just start investing when the market has fallen without any knowledge of the stock market. Read on to see the common mistakes one makes in the course of investing:
1.Withdrawing your funds:
Markets are volatile. Thus, they will fall. But they also have bounced back every time. For example, the Harshad Mehta scam in 1992 where the stock market was severely hit. So, do not withdraw your investments from the market just because the market has fallen. Corrections in the market are temporary, but growth is permanent.
Do not see the short term fall, aim for the long term.
Also read: Undertake investments the Warren Buffet way
2.Stop looking to buy stocks when their price falls:
Many of us feel like buying discounted shares when the market falls. However, you should conduct research on the stock and look at its past performance. Just do not fall trap to purchasing stocks in the falling market.
3.Investing on a short-term basis:
When the market is falling, investors tend to start deviating from their purpose of investments. They begin to look at the short term fall and change their investment strategies.
You need to allocate your funds well so that it has a long-term focus.
4.Using emergency funds:
If you have built a fund for your emergency needs, do not use them to make your portfolio better. You have saved the emergency corpus for times when you need them the most.
Do not put your emergency fund at stake.
5.Buying more to average:
In a falling market, investors tend to purchase more at discounted rates only to average their costs. Just because you had purchased the stocks at a higher price before, avoid doing so. What you should understand are the risks. What if the stock prices start falling further? Thus, do not make decisions without considering this.
Thus, as an investor, if you have been making any of the above mistakes, avoid them. Always remember that the time you spend in the market matters. If you wait for that perfect time in the market to start investing, it is not a wise decision. This is because the markets are unpredictable.
For more insights on investments, head to a financial planner now.