You are a proud growth investor if you do the following:
- Invest in stocks that pay minimal or no dividends since your objective is capital appreciation.
- Find sectoral leaders, check their past performance and growth potential, and park your money with a strong belief that the stock will grow.
- Study various fundamental parameters before picking stocks.
- You can wait patiently and do not need a regular income from your stock investments.
- Short-term volatility does not make you panicky.
But are you making the profit you deserve or expect? Do most of your trades and investments reap rich returns? If you have answered ‘No’ twice, you are at the right place.
Read this article until the end to learn about the common mistakes growth investors make while placing their trades and tips to invest in sure-shot winners.
Avoid These Growth Investing Mistakes to Make Spectacular Profits
Not only new investors but experienced investors also make some avoidable mistakes in the market. These mistakes are painful since they take away the investors’ hard-earned money. How long have you been looking for a solution to this? Fortunately, you won’t be the same investor after reading this article. Scroll down to explore more.
Trust Others More Than Yourself
It is not uncommon to find investors relying on trading tips providers, friends and relatives while making their investment decisions. And, some traders listen to others’ advice while taking a drastic step like selling their investments before realising their full potential. Whichever side you belong to, stay assured about losing your capital.
Stock market investment must be backed with proper research. And, the analysis must be carried out by none other than you.
Every investor in the market has a unique financial goal, and the strategy must suit their financial capability and risk profile. There is no guarantee that the expert investor whose advice you are listening to has a holy grail method of making profits.
Hence, before investing in growth stocks, you must conduct thorough research and go with what your heart and logic suggest and not what other people say.
Be Loyal to a Company
While past performance certainly speaks volumes about a company, it does not predict future direction. Quite often, investors fall in love with a stock so much that they hold on to their losses even when the company displays visible signs of an impending downturn. They have a strong conviction that the stock will turn around anytime soon.
Look around the stock market, and you may quickly find companies that went from heaven to hell in no time. The market does not care for emotions. The market works on hard facts. If a company displays prospects of high growth, investors will flock in numbers. But, if the company loses its sheen, investors will go away only as fast.
Hence, it is essential to book minor losses at times than to lose your entire capital.
Staying Away From Diversification
Growth investors generally enter the market with a long-term perspective. They do not care about the daily swings of stock since they have three to five years of the investment horizon. However, even ace investors cannot time the market properly, and there is no guarantee that the stock will provide the returns you expected it to when investing.
A prudent approach would be to diversify your investment into multiple stocks across sectors rather than putting all your capital into one stock. At any point in time, a few sectors perform better than other sectors. For example, during the pandemic, the Information Technology and Pharma sectors produced star performers while other sectors like metal, banking, financials, etc., performed poorly.
Hence, growth investing might provide you with the best returns when you diversify your investment across many sectors and among large, mid, and small-cap companies.
No Respect to Trend
While growth investors generally choose high-performers and stay invested until their investment objectives are fulfilled, the broader market sentiment also plays a significant role.
If the broader market sentiment is bullish, you can expect a meteoric rise in high-growth stocks. However, if the market sentiment and global triggers are negative, the company will most likely trade sideways without any major movement on either side. The Harshad Mehta Scam and the 2008 Great Recession are examples of how bad and lengthy stock market crashes can become.
Hence, even though you prefer value investing, you must not ignore the market trend while placing your investment bets.
Growth investing works best when you are patient and have a time-tested strategy to make profits. The right online trading app also makes a subtle difference between profits and losses.
Shoddy apps are slow and opaque, resulting in vast differences between your bid price and the execution price. High-quality online trading apps, such as 5paisa, uses super-fast world-class technology to ensure lightning-fast order execution. Try 5paisa now to give your investments the right edge.