In the past few months if reports are to believed, lakhs of new investors have jumped into the stock market. Especially after they saw a small minority of experienced investors getting extra ordinary returns. Anyone who has invested in value buys would easily have made over 100%. With a little bit of more research and knowledge companies like LIC Housing Finance and Jindal Steel have given returns between 300%-500%. These have rewarded investors all on basis of value and not ‘hot tips’ that are manipulated.
Unfortunately many new investors don’t realize this and have a lot of fantasies and myths in their mind when they enter. I had them too when I started out! Here are a few of them:
1. I will spend time trading every day and won’t do anything else. Isn’t that how hot shot multi-millionaires make money in the movies?
2. My uncle has been investing for several years. I will get tips from him. Of course it doesn’t matter that my uncle is on the verge of bankruptcy for the fourth time and has turned into a alcoholic.
3. I have magical powers and any company I invest in will give me returns in excess of 100% within a week.
4. The first company I invested it gave me 10% in a single day. This isn’t just co-incidence and luck, but because I am investment genius.
5. Everything I hear on the business news channel and everything I read in the newspaper actually needs to be followed.
6. Rich investors watch every single move of the Sensex and know exactly where it is headed.
7. I need to get tips from everybody – specially my broker. I don't care about knowledge, it won't make me rich.
8. My broker exists only to make me rich and wealthy. He loves me a lot.
9. I need to sell all my assets and remove all my money from the bank and pour it into a single share that can rise by 1000%. I read about it on an online forum – it must be true.
10. No need to study the business model, research reports, read or study financial statements. Losers do that!
I had many of the above fantasies when I started. They lead to losses – luckily I started investing with very small amounts. Following any of the above will most certainly lead to losses. You can be smarter than me and learn from my fantasies!
Keep smiling, laughing and happy investing!