Common Mistakes to Avoid When Stock Markets Fall

Common Mistakes to Avoid When Stock Markets Fall

It is true that your precious savings needs to be protected. That seems like a quote of Ayn Rand: Wealth is the product of man's capacity to think.

I have always advised young investors investing for long-term capital gains not to panic if the value of their shares came down rapidly in just a year. It is not advisable to sell them to avoid further plunge. A strong constant fact about the share market is that it is subject to ups and downs. The price of the shares would rise all of a sudden, and selling would only make it difficult to recoup your portfolio to meet your long-term financial goals.

The share market is like a voting machine in the short run and weighing machine in the long run, hence long-term capital creation requires buying shares in an advantageous share market. Short selling (selling at a higher price and buying again when prices fall) shares at a higher price, in the hopes to replace them by buying at a lower price proved risky for many investors. They all have soon realized that it was always better to have a cotton shirt on their back rather than aspire and fail in getting a silk shirt and have no shirt at all.

People believe that investment experts and large stock broking houses can forecast the stock market. If we watch and follow them we will be able to make quick bucks in short selling and futures and options trading.

Is that so?

If there are investment experts who will be able to correctly forecast the market they will not be writing or giving interviews about it in the media. They will be silently investing and making money without revealing their secret.

So, never go into into shorting deals during a share market fall, but to hold on and invest more if you can make good returns in future. It is a known universal fact that investing in thriving longstanding companies rather than, a less known company would guarantee you a good return in the long run. You should avoid investing a large sum in unknown penny stocks.

It is always advisable to take calculated risks and not blind risks. By investing in a penny stock you are taking a blind risk which all successful investors avoid consciously.

Sticking to your share portfolio and buying more shares intelligently for long-term creates wealth.

The final word

My final word of advice for long term investors is to never allow sentiments or short term rise-fall alter their investment decision, and to always buy in a falling market. I am sure a rational decision attended by safe dealings can make your long term financial goals a reality.

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