The Common Mistake while Investing in Stocks…..CA. Amit Vangani

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 The Common Mistake while Investing in Stocks…..  CA. Amit Vangani

AuthorCA. Amit Vangani

CA. Amit Vangani

amitvangani18@gmail.com


As a new Investor, we are very much excited about finding the “Next Multi-bagger “and hence get carried away without even knowing what the company does & who is managing it, due tothe short-term buzz for a particular stock, created either in News channels or in the social media.
Let me explain one of the common mistakes’ newbies do while Investing, with an example:
Say you are currently in Hyderabad & want to reach your destination i.e., Bangalore and decided to go via road by renting a car & a driver.
Say you have 2 options and let’s assume Hire price is almost same in both of them.
1. Go in a Swift Dzire
2. Go in an Audi
Since the price is almost same, most of us might choose the 2nd option without enquiring any further details.
But the catch here is
1. Driver of Swift car drives carefully and never over-speeds keeping the passenger’s life safe and no doubt has a track record of last 8-10 years with not a single accident by him.
2. Driver of Audi car is a newbie who is driving only since 1.5-2 years.
Also he tends to over-speed in most of the rides to reach the destination earlier than the estimated time because in that case he can complete more rides within a stipulated time & thereby earn more.
And with not much of surprise considering his driving skills, he had a 2 minor & 1 major accidents with the car.
Now to link it back to Investing, most of the new investors find the company attractive from the outside just like the Audi car but fail to realise that it is not only the company’s name that is impacting the stock prices rather the efficient management team & systems put in place that are delivering consistent returns for the company which is thereby reflecting in stock prices (long term scenario).
As a New Investor ,we find that company attractive which is over-speeding most often to earn extra returns by improper means by placing the Investor’s money at RISK.
And we ultimately forget our main intention
which was to reach the destination safely in case of travelling & to generate wealth mostly with the help of compounding.

 

Conclusion -Get proper information about the Driver/management before deciding a Car for traveling/ company for investing.
Consistent returns & safety of capital should be the priority.

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