Over the previous year, many new retail investors have established Demat accounts to profit on the stock market’s bull run. However, it should be highlighted that ordinary investors are more likely to make mistakes in a bull market, resulting in irreversible portfolio damage. There are five frequent blunders that ordinary investors should avoid during a bull market.
Attempting to time the market: It is tough to time the market and requires financial skill. Most investors cannot accurately time the market’s ups and downs. The majority of them cannot recognise a bull market in its early stages. When the market rises sharply, they realise they have lost the window of opportunity.
Online stock market investing should be made with a specific aim, rather than relying on a certain time frame. As a result, you should constantly set investing goals and invest for the long run. The order in which the markets open and close is unimportant.
When the market is trading at all-time highs, you should avoid making lump sum investments: Since it may result in poor returns. Instead, you should invest that big sum in SIPs over 3-4 years in a phased and controlled way. When we put our money into anything for a long time, it becomes a long-term investment. It evens out all the highs and lows and offers us a reasonable return at the end of the day.
Closing existing SIPs: Investors tend to close their SIPs based on the short-term poor return value during a bull market. While accumulation is the primary goal of a SIP, you should not focus solely on the returns. Now is the time to remain patient in both the bull and down markets. Return will follow up on the situation. In due time, it will stand on its own.
Incorrect asset allocation: Hot stocks are frequently in the news in a strong market. Investors are lured into buying these stocks and putting all their money into them, ignoring
the proper asset allocation. To protect your investments, you should spread them over various asset classes, such as equities, debt, and digital gold. To lessen the danger, as a result, you must ensure that your money is correctly divided across asset classes to achieve your investment objectives.
Investing in underperforming stocks: When the stock market is at an all-time high, investors should avoid underperforming stocks or trading at 52-week lows. A stock’s 52-week low does not indicate that it is undervalued or that it is available for a lower price than its peers. You should not be seduced by such a circumstance and refrain from purchasing low-cost stocks.
Investors tend to disregard fundamentals and focus more on market feelings in a bull market: In general, regardless of market conditions, a good company’s business, management, and long-term goals do not alter much. Market attitudes influence short-term market swings, while fundamentals drive long-term profits. As a result, disregard the market noise and focus on the fundamentals while making financial decisions.
Investing in booming industries: During a bull market, retail investors should avoid investing in sectors that have already achieved significant gains, such as the pharmaceutical and information technology industries. They should stay away from sector-specific funds that have previously been shown to be profitable. Investors might prefer to put their money into a sector that has lagged the overall markets but is projected to recover shortly. If you don’t have the skills to identify such a sector and stocks inside it, index funds or well-managed diversified funds are a better option.