7 Common Mistakes That Nepali Investors Make In Share Market

DWAIPAYAN REGMI

Currently, there are a large number of investors and traders who are seen entering Nepal’s stock market. This certainly is a positive sign for the Nepalese capital market. Although there are overwhelming responses seen in the primary share market, there is an equal number of responses seen in the secondary share market too. The increased investment around with the higher level of turnover proves it all. However, the share market is such a place where people gain and people make losses too – they are all important parts around. The share market cannot grow always – there are upward trends, and downward trends too.

The share market is not always on the rise. The price of your stock does not always keep on going upward, but will fall too – and that is never known when. Had it been always growing, there would never be a reddish chart list. Everyone would invest in the share market with aim of profit – but not all of them make it. If you buy a stock today, the seller has sold it because he felt that it will not further rise.

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Here are major mistakes that people often make while trading or investing in the Share Market.

1. Failing To Understand The Meaning Of Investment

Investment is always related to the next crucial word ‘Risk’. People act like Share Market is the place where it is all about making money and only deals with profit. But, there is another side around which has a similar story of losses. Any investment can lead to loss – including IPOs, and the new investors or traders fail to realize this. Just because NEPSE is in the bull trend, it should not be forgotten that NEPSE was in a bearish trend too, where the stock price fell below Rs 100 too.

2. Attachment Towards The Company

Human emotions are part of a human being. They get attached to anything physical or nonphysical. This happens to the stock that they purchase too. Just because they regularly stay updated about what their purchased stock company has been doing, they feel that they are part of it and forget the fact that they bought the stock to earn out of it, not to be the owner of it. And hence, they fail to make a sale when it has kissed its height – without realizing that they can again buy the same stock when the prices drop down.

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3. Not Diversifying

Investors, or traders if they stay concentrated on one particular industry, may have to suffer. Because in-stock market we never know which sector would rise on one particular day. There could be the rise of Microfinance in one particular week, but other industries would just stay silent. It is important that people gradually diversify their portfolios so that they can make the best out of it. Even if stocks of banks are not rising, they can make the best gain from the hydropower sector then. Concentrating on one particular sector is a big mistake.

4. Selling In Selling Time!

You cannot make a profit if you fail to make sales at the appropriate time. Nepalese investors have this habit of selling their stock when they need it, which is wrong. You should make sales of your stock time and again to grab up the profit. Your time of money requirement cannot always ensure your profit. So, make sales when it is green, and purchase when it is red.

5. Hold On – You Need Patience

You are not at any loss unless you make sales of your purchased stock. People tend to invest through borrowings and funds that they would gather around. They take credit facilities to invest in a quick return. This is indeed a big mistake. You all need patience in one way or the other – and make investments accordingly. People make the panic sale if things go beyond their expectations, and end up making mistakes. So, relax, find funds that would not trouble you sooner, and make an investment. You will get your return, but it can take time – stay prepared to be patient.

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6. Being Greedy

This is the next major mistake that troubles you. Find your mark, and be prepared for the appropriate price. Find out the average price and then decide what amount should you expect to make any sort of purchase or sales of the stock. People start getting greedy even if the stock reaches out to their previously marked value, and then ultimately end up being in a panic because of the same greed. At the time when Forward Microfinance’s stock was above Rs 4000, those IPO holders did not sell expecting that it would cross Rs 5000. Without their notice, it fell in such a manner that they could then sell it when the price dropped down to Rs 2800.

7. Following Rumors

Rumors set the market. This is not good, but this happens everywhere. People go after rumors and make investments ending up being in trouble then. It is important to understand that there would appear rumors, rumors might come close to you – but always stay alert and figure out when to trust them and not. Rumors should not determine your investment pattern anyway.

Conclusion

There are training around, but had these training been able to make you rich – those trainers would not be there teaching you. They just teach basic things around. Invest in any small fund Rs 2000 or Rs 5000, and learn it on your own. It is also important to understand that big players rule here, and small players should just try to figure out the trend about where the big player is hitting around.

Everyone can have their way of investing. There was this investor who explained – 20-20 strategy – if the value goes up by 20%, sell it; if it falls by 20% either sell it, waiting for next fall to again buying it; or again buy it to average your stock pricing. There was the next investor who suggested purchase once the value of stock starts rising, and makes sales as soon as the price begins to fall. Everyone, every book, every investor has their ideal way of investing. Make sure you hear them all, but make your own choice upon investment.

[Mr. Dwaipayan Regmi is a banker.]

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