I entered stock market without understanding its characteristics and nature. When I entered the market in March 2021, the market was booming and I thought I can buy any stock and it will make money. So I went in to monitor for few days, buy the stock and hold it for couple of weeks and make some money in the process. I didn’t check on the taxes and fees that I will be paying for each transaction. I didn’t spend time to read about the companies and I didn’t realize that I am buying a share of the company and I need to understand the company, it’s finances, the sector it’s in, it’s ROCE, it’s cash flow, shareholders etc. As there was no basic understanding I was concentrating on buying at low price and selling at high price, that’s all.
Later I entered options and futures with some advice from friends to make quick money by buying more quantity at a margin. I did make money initially but later I lost all of it since it didn’t understand the underlying facts of options and futures. I lost all the money that I made in equity in futures and options.
The greartest mistake was to enter options and futures without even understanding the underlying stocks and it’s performances. So my fellow mooers please don’t do the following while you are new to the market (at least you need two to three years to know a little)
1. Don’t buy using margin, always use cash and buy only the quantity that the cash can buy even if you are sure that it will earn more money in short term.
2. Don’t try options and futures without understanding what they are and how to buy and sell them whether it’s put or call. Give yourself few years before you enter into derivatives.
3. Have a plan for your investment - do you need it for retirement or kids education or their marriage, decide on it and then be patient enough for that money to grow. Don’t keep buying and selling quite often as you will loose more on taxes and fees. This will also help you to train to be patient and will keep you away from entering options and futures. Likewise decide whether do you want to be an investor or trader.
I thought I will share these with you guys so that it might help the new entrants in the market.
Merry Christmas and Happy New Year to you.