6 Ways to Avoid Losing Money in the Stock Market

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Earlier many investors were not willing to invest in the stock market because they had a different picture of the stock market, many used to call it a "Satta Bazaar".

But with the recent transformation of technology and social media, financial literacy is rising at a good phase.

Now the investors are switching from old investment methods like FDs, PPF etc to the stock market. 

But an investment in the stock market comes at risk If not done properly, so let's get into our topic of 6 ways to avoid losing money in the stock market:

1. Avoid taking tips/advice- New investors mostly get stuck with these tips and advice which directly affect their capital and end up taking losses.

The person giving you tips is just recommending his assumptions or you can say "Tukka maar raha hai" and there's no guarantee that the tip will work.

If you have taken any tip then you might have noticed one thing that with time you are just bearing losses and there's hardly any profit.

2. Stay away from penny stocks- Always stay away from penny stocks, now what is a penny stock? A penny stock is a stock of a small publicly listed company and it is very illiquid which means the buyers and sellers are very limited so your order stays open until there is a counterparty and sometimes the trading gets halted in such stocks.

Also, the price of the stock is very cheap like 10 Rs, 50 Rs etc, so this price attract the retail investor and they hope that it will shoot up in future and can give a huge profit.

In this hope they buy and in case they are in profit then they are not able to sell it due to less liquidity hence always stay away from penny stocks :)

3. Diversification- There is a quote by Warren Buffet "Don't put all your eggs in one basket" I have also mentioned this on my Mutual Fund blog.

Diversification means investing your money in different companies, sectors, industries etc rather than investing in just one single company.

Diversification reduces the risk of your overall portfolio hence it is always advisable to diversify your portfolio.

4. Choose a discount broker- There are two types of brokers- Traditional and Discount. The one key difference in both types is the advisory part.

The reason I am telling you to choose a discount broker is that here you won't get any calls/tips like the traditional brokers.

The traditional broker gives a revenue target to its employees and then you are the target so they urge you to trade/invest so that they can generate revenue or brokerage. 

Sometimes they can manipulate your thoughts or decision by probing hence choose a discount broker so here you have the total control.

5. Avoid F&O trading- You must have seen attractive thumbnails like earning 3 lakhs every month by trading in F&O, so with such figures, there's something called "Greed" which gets developed in the minds of retail traders then they blindly enter into the F&O segment without knowing the risks and ends up burning their capital.

If you want to avoid losing money in the stock market then always stay away from F&O trading unless you have the proper knowledge and experience.

6. Knowledge and Research- This is an important point where most investors or traders gets slip. 

Let's understand with an example, You are a student and you have an exam say next week, so now you have two options, you can either study and pass your exam or you just give the exam without any study.

In the 2nd case, the chances of getting failed are very high.

So I believe the stock market is like giving an exam, If you have studied and done your research then the odds of losing money is very less and If you trade or invest blindly without any study or research then the odds of bearing a loss is very high.

Make sure to note these points so that you don't lose money in the stock market ;)

See y'all in the next blog, Cheers!






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