Stocks are the small units in which the ownership and capital of the company are divided. In many countries, stocks are also known as shares. A single stock represents fractional ownership in the company, fraction of the company’s earnings and voting power. There are various types of stocks; some have increased voting rights, and others have no voting right, some have higher earnings while others have priority over other shares to get the dividend.
The earliest stock trading can be traced back to 1250. Around 1250 in France, 100 shares of Bazacle milling company were traded. A shareholder is a person who owns one or more shares in a company. Both private and public companies can have shareholders. The price of shares keeps on fluctuating due to the theory of demand and supply. The amount of these shares is mostly determined by the market forces of demand and supply.
Reasons For Failure
1. Lack Of Patience
The biggest mistake made by investors is not being consistent and taking hasty decisions. Lack of patience is the biggest enemy of investors. Investing experts often say that “if you are not ready to hold your investments for life long, then do not even think of investing for even 10 minutes.” The biggest tool that will help to grow money is patience; if investors do not give their funds proper time to grow then their investment is useless. Investments require time to grow so; it is essential to keep patience. The biggest mistake that people make is not maintaining composure with their investments.
2. Buying Way Too Costly Stocks
People often start their investments through a broker; these brokers usually charge a high commission. This commission makes stocks too expensive. People are often advised to buy stock through a reputed broker after verifying the prices. Experts always say that investments should be made through a reputed broker only. People often make investments through random brokers who guarantee them high profits. This is one of the biggest mistakes that people make while investing. Investors should buy stocks only through reputed brokers so that they are not overcharged. It is often advised to investors that they should do proper research before investing as some people even pay high brokerage fees for fewer services.
3. Poor Planning
Poor planning fails, and this is one of the primary reasons for failure in stock trading. Investors must take their investment decisions only after proper planning. Poor planning causes difficulty for investors to determine their goals, and this causes them to make wrong decisions. Investors often do not plan their investments properly; as a result, they do not have proper strategies and goals. This mistake causes people to make wrong investments and mismanagement of funds. Investors with a low-risk profile should invest in more stable and consistent funds for safer returns while investors with a high-risk profile should invest can in more risky funds as their chances of profits would be higher. Hence, proper planning is the backbone of success in stock trading.
4. Running After Short Term Gains
Stock market investment requires patience as, without patience, the stakes cannot grow. People should understand that money grows only with patience, and short term gains are not consistent and are risky. People should keep composure so that their investments can grow and give them adequate returns. It is often advised by experts that running after short term gains is one of the biggest mistakes in investing. Investors need to understand that running after short term gains can cause them enormous losses. No investment is better in the short term as compared to long term investments. Hence, people are advised to stop running after short term gains and should focus on long term growth. Many investing experts often say that ‘a share is to hold onto forever.’
5. Not Being Aware Of The Company You Are Investing In
The smallest yet biggest mistake made by investors is not being aware of the company in which they are investing. The stock prices vary due to the market forces of demand and supply, so the real value of stocks and their efficiency can only be determined by their financial performance. Investors need to do proper research and analyze the company before they start investing in it. Only if the investors are aware of the company in which they are investing, then they can make the correct investment decisions. Investors need to do proper research so that they are aware of the financial performance of the company, which determines the real value of its stocks.
First-time investors often make many small mistakes that have substantial adverse outcomes. An investor must do proper research and analyze the facts before making a decision. Investors often make hasty decisions that cause them losses, poor planning results in wrong decisions and in an attempt to make quick profits, people take wrong decisions. We advise investors to do proper research before making decisions and maintain consistency with their investments.
Without proper patience and analysis, investors cannot make the correct investments. Investors need to plan their investments so that they are aware of their goals and have a strategy to achieve them. To achieve success in stock trading, investors need to maintain consistency and have patience. Making financial gains and growing money is a long term activity, and the main factors that affect investments are patience and research.