We’re all concerned about money. It’s understandable why someone should be concerned about having little or no money, but even those of us who have money continue to be concerned about money. This is especially true if we have money invested in the stock market and the market goes down. Stock markets fell sharply in 2020, during the first wave of the COVID-19 pandemic, catching most investors off guard.
While a stock market crash or market correction is hard to forecast, investors may use a variety of tactics to mitigate the impact on their investment portfolio.
The stock market is volatile, and a crash is every investor’s worst nightmare. In the stock market, a downhill is visible since it operates in a cyclical sequence, and trading cannot be done in a single direction. The stock market meltdown as a whole is unavoidable, but there are steps you can take to minimise the impact on your investments.
Even though many institutional investors abandoned the market during the early stages of the pandemic, ordinary investors flooded in and gained handsomely, particularly in successful technology companies. Playing the market, of course, entails some risk. During the stock market’s unrelenting ascent, there were many reports of newbies as well as seasoned investors making blunders in online investments.
Here are Five Investing Disasters to Stay Away from While Investing Online
1. Being in a love-hate relationship with stocks
It’s all too easy to fall in love with a stock we’ve invested in, and forget why we bought it in the first place when we see it do well. In an online investment, always remember that you purchased this stock in order to profit from it. If any of the fundamentals that prompted you to invest in the company change, you should consider selling the shares.
2. Patience shortfall
If you gradually and steadily build your portfolio, your long-term returns will be higher. Expecting a portfolio to do something it wasn’t designed to accomplish is a recipe for disaster. This implies that for online investment, you need to keep your portfolio growth and return goals in check, as well as have a realistic time horizon in mind.
3. Uncertainty about investment
Warren Buffett, one of the biggest investors of all time, recommends that for online investment, one should not be investing in companies whose business strategies you don’t comprehend. The best method to avoid this is to invest in a diverse portfolio of exchange-traded funds (ETFs), mutual funds, and index funds like Vanguard Small Cap fund.
4. Going in without a plan
Going through with investments without considering aspects, such as one’s financial objectives, risk appetite, or investing time horizon, is not recommended. These are key considerations to address before beginning your financial adventure of online investment. It’s critical to keep track of these aspects, perform the appropriate back calculations, and ensure that one’s portfolio is on track to accomplish the objectives. It is suggested that you seek the advice of a financial counsellor in this regard.
5. Trying to predict the market
Without proper information, attempting to time the market might have a detrimental influence on your results. It’s extremely difficult to time the stock market perfectly, and there are several biases at play while attempting to do so. Even institutional investors have difficulty precisely predicting this. Other approaches, such as SIPs, are thus advised for averaging out one’s investment over time. Furthermore, it is critical to allow your investments to compound and allow the power of compounding to work its magic.
When done carefully, online investing can be a great way to build wealth. If done impulsively, the same can lead to financial loss. Hence, while investing online, prepare and make decisions carefully. Also, avoid investing in companies whose business strategies you don’t comprehend.