When people start to invest in stocks, they do so with the sole objective of making some quick money. But let me tell you that this is only a dream as majority still loose in stock market even today. It may have happened that due to some reason whatsoever, there are instances where untrained investors had make some quick bucks, but these are only one-off cases. More often than not we buy wrong stocks at wrong times. Investing in stocks is risky and people must develop their investing basics before investing directly in them. If not, then stocks market is not for you and it will be better that one should not invest in stocks. Lets see some reasons which will highlight if we are doing wrong in stocks and its better avoiding.
If you are buying stocks, but still stock market is a puzzle for you.
This is one indicator which says that you are ignorant about stock market. Suppose you bought Reliance Industries Ltd (RIL) yesterday and someone asked you why you bought this stock then what answer you can give? I am sure majority of people will say, RIL is a big company, Anil Ambani being the owner will never let its shareholders down, so many people have money by investing in RIL in past, RIL is a blue chip company, my friend told me that RIL will be a good buy, as he himself is holding that share. You will appreciate that we only give this type of reasons when we buy stocks, instead we should be talking about fundamentals of company and its earning yields. If this is a case with you have two options, wither increase your investing skills or else stop investing in stocks directly.
People are not tuned to the short-term volatility of stock market
If one cannot digest short term fluctuation in stock prices then it is most likely that they will take a panic decision. All of us buy stocks with objective to selling it for profits in future. In short term stock prices may fall very low to levels we have not estimated. This type of fluctuations of price common in stock market, but for people who are not tuned to this volatility will surely panic. For such people I will only say that they should not invest in stocks directly.
No need to take that extra risk when Mutual Funds are present
We know that investing directly in stocks is risky. The best alternative is to let an expert do investment in stocks on behalf of us. This expert knows stock market, has appetite for market volatility, knows investing basics and can also do stock analysis. This expert is no one else but the Fund Managers of a mutual fund company. Investing in stocks through mutual fund route give you a well diversified portfolio thus minimizing your risk of loss. There are some excellent mutual funds existent in market that gives you a very strong reason of not to invest in stocks directly.
If you are not an expert of stocks then you are probably investing on others advice
Let me tell you that this is very dangerous. I am not saying that the stock advice itself is bad, but the timing of those advice makes it bad. Consider this example, few months back Warren Buffett bought his first IT stocks in form of IBM. Following his footsteps, millions of investors will start buying IBM stocks. Problem is not that IBM is a bad company, but the price at which Warren Buffett buys stocks of IBM and at what price it is available to us. By the time this news reached all of us that Warren Buffett is buying IBM, the stock price has already shot up too high. So timing the purchase of stocks is very important. Even though your friend us advising you to IBM, be sure to check the market price of stocks. Generally novice investors start to buy stocks when its market price is getting on top. This is wrong. Careful study of stocks will help you time the market to perfection.