7 Deadly mistakes of the Long Term Investor

dollars-at-stock-marketOh so you are a long term investor. One of the Warren Buffet types! You think you are going to rake tons of moolah sitting on a pile of shares. You think you will preserve those equity papers for next ten years and will retire rich. Or is there guilt inside?

May be you feel that just buying and forgetting is not the solution. Well you are right. If that would have been the case, every damn person on this planet would have been a Warren Buffet. It just doesn’t work that way. Yes buying for a long term is right, but that’s just part of the story.

There are many other things that we need to take care of. Finally being a millionaire will never be that easy. Well you can learn to be one with just reading one post, but still what we can highlight is the mistakes we do thinking we are a long term investor

Are you a long term investor by Chance or by Choice?

Many of us claim to be a long term investor. Are we really? Are you talking about the shares that you last month since someone told that it will double in a fortnight? It doomed. And the best option to that we took to caress our mind is that – “This is a good stock. I will be with it for next 5-10 years. I am a long term investor”. Many of us have become long term investors by chance and not by choice with similar stupid reasons.

loss-in-stockBuy shares and forget it. Than forget your money!

Ya, ya we all know. Buffet said to buy the best shares today as if the markets will remain closed for next 10 years. That way you will preserve them and reap huge gains. Right? What Buffets intention was that we are not supposed to track the Stock market ticker every five minutes? We have to be confident. But he never implied to take this advise in the literal sense. Many have bought shares and tried to not even think about them for 10 years, only to realize that some of these companies are no more after a decade! Even a long term investor has to keep in touch with the markets.

Considering shares as one unit

This is another deadly sin. The root cause is that we are lazy. Lazy towards complex tasks. We always want lives to be simpler. We talk “I will buy Microsoft shares this 15th and sell Walmart by 20th”. Why on earth will we do that. Are you sure Microsoft reach the bottom by 15th or Walmart the top by 20th. We often buy and sell shares as one unit. The right strategy would not be to buy and sell. But to Accumulate and Disperse. Do that in small quantities. That will help you to track your portfolio well and reap benefits too. (Note: If you deal in very few quantities this tip will not apply to you, because all it will leave you with is tons of brokerage unpaid)

timing-the-marketThe art of Timing the Market

This is a mistake that every investor has done many times in his life. We try to guesstimate the best possible scenario. We believe we can sell when the bourses increase 25% by next quarter, what if it increases in a month. There is chaos. “Either there’s something fishy? There’s a collapse in disguise? I need to sell immediately”. Or we would say “Hey 25% increase in a quarter. I guess I can hold it for some more time. Who doesn’t like extra profit? Right?”  – Wrong! Come what may we just can’t time the Market. Markets run with greed. We just can’t calculate the absolutely right time, price and day. We have to stick to our plans rather than haphazardly revising them. We just cant time the markets. Period.

Timing your trade with your personal commitments.

We buy shares with the intention to make profits. Whether we will profit or not we always dream about it. We pre-calculate what we will do with that money. And than our desire to fulfill those dreams start to drive the time when we will buy or sell stocks. Take for example understand this sentence. “I will sell these shares by mid June and buy myself a house.” Is June the appropriate time to sell? What is deciding the dates? Try to be more practical when dealing at the bourses. And if you have plan too. Why not find a more appropriate target that is achievable before June and than invest the returns in a debt instrument. You might earn less, but you guarantee yourself a decent house.

stock-trading-profitsBonus tips for stock trading

Yes there are 2 more mistakes to go in our list of 7. But mind you these 2 are very powerful. They can make or break your fortunes. Conquer these and you will be dead sure to rake the moolahs we discussed. And so what are these? Well, I don’t know. Yes I really don’t know. And who will? You!

There is no “one size fits all” rule at the bourses. Understand your trading pattern. You commit some mistakes again and again. You loose money almost always but it’s really tempting to commit these mistakes. What are these? Post every day or every sale, try to analyze your pattern of trading. Try to find 2 lessons that you have to learn by analyzing your own self. These 2 can actually change the way you have been trading. If you cant find these patterns. Take a print of all your transactions and approach a friend who can guide you.

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price. – Warren Buffett

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{ 1 comment }

Socorro Spray June 23, 2012 at 6:37 pm

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