My 10 mistakes in Stock Market

When I started investing in stock market, no one was there to suggest me any thing. In last 5 year I learned many things in hard ways. I wish to share my and my friends top 10 mistakes in Stock Market.

Courtesy: CartoonStock

1. I assumed that stock market can go only up, and if ever fallen, its a buy opportunity. This is a very wrong assumption. Because there must be some valid reasons too, to fall in price apart from speculations. Otherwise who want to sell cheap things. Other reason is that if some thing can fall 10-20%, it can fall 40-50% too. So wait patiently till market get crashed or invest small portion on regular basis.  
2. I took loan from my friends and banks. I assumed that I can earn more than 10%, so I will keep the rest of money. This is where most of the people like me are wrong. You can not invest borrowed money, its only spare money which one do not required for many years can be invested. But surely you can do investment for some one else, like many investment adviser do.  
3. I sold my winning bets and kept loss making companies in hope that one day they will become profitable. In fact, I keep adding more shares of loss making companies. How can some one cut a blossomed tree and keep the fruitless trunk. 
4. I was bit impatient with my investments. I thought few months are enough to earn big profit. You keep feeding your kids for 25 years without any expectation and expecting your investment to enrich you on daily basis, is a fools paradise.   
5. I leveraged my investment using Future and Options with out proper hedge. First of all, you can not do investment on someone else money either directly or indirectly. These are indirect financial tools which had their all together different applications. However greed has taken over and ruined the primary concept of hedging. It is understandable if Infosys to currency hedging to protect its Doller revenue, but considering it as a investment tool or lottery ticket is blunder. many of us do it unknowingly. Second, as a basic principal of leverage, one should hedge its position, to limit the losses. I will write another article on this. Some people devices stop loss, this is a waste concept. I will explain why in future. 
6. I made big investments in single trench. Due to huge price fluctuations on daily basis, single trench investment is not recommended. It is not for retail investor. If you are dealing with industrialist directly and buying significant shares, you can bargain and buy it one trench. However being dependent on market mercy, and not having any bargain power, systematic investment plan is best option. One should invest a certain amount of money in a diversified portfolio on regular basis.  
7. I was naive to the market and started investing based on some one's advice. I did not hire a professional adviser, or researched enough using books and visiting actual company premises. I would say that it is not an entirely investor fault. System of advisory is not transparent in any profession. However once someone have a basic understanding of own disease, it is easier to find a doctor. So before investing and searching for a good adviser, you should read some book and have your own investment goals. Its better to have some research of your own and then look for an expert, otherwise their jargon words make you bankrupt.  
8. I thought, stocks are like lottery tickets, every thing is only luck. Now I know that there is only 20% luck and 80% in hard work, knowledge, decision making ability and minimizing greed and fear, like any other park of life.    
9. I became too much dependent on quarterly results of a company. I forget that these data can be manipulated. Like many researched and government data, it is very easy to tweak a quarterly of half yearly result. So one has to look for significantly long performance period to understand the behavior and prospects of company. I think not only net income result, but 'Cash Flow' direction per year basis is very important parameter. We will discuss this in future. 
10. I track my portfolio on daily basis and made many decision emotionally. I remember a Boman Irani dialog in 'Munna bhai MBBS' that he can not operate her child because he become emotional and his hand can shake. This is very true in case of investment. These decisions can not be taken based on someone's emotion towards a company. If your boss do not hire you based on personal relationship, how can you give your hard earn money to someone just because you 'FEEL' that they will do good in future.