5 Myths Debunked On Stock Market Investing

Stock market investing as is known received crazy traction amid the Covid outbreak when people sitting at home for work were left with extra time to spare for the analysis required in the market. Now as are the market dynamics together with the need of the hour as inflation beating returns can be garnered through diligent stock picking, here we go about telling you some of the myths associated with stock market investing:

Buy Good stocks and just forget

You may be good at picking a good stock but holding it till eternity will never make sense. This is with the change in time you need to align your investments accordingly or else you will be left in a lurch. This is said because sometime thriving business with a major market share fail to realign their business and end up. So, just at you try to time the market and want to enter the scrip at the right time, you also need to take your positions off at the right time.

Buy stocks that you use frequently or know of the brand value

Having high brand equity is no means a certainty for the stock to rise and rise and propel gains for your stock portfolio. The simple case can be the stock of IRCTC which is the nationwide used service and despite the stock has been tanking and tanking. As of writing this copy, IRCTC since the time of stock split and post adjustment in price is now seen trading at a discount of over 50% from its 52-week high price of Rs. 1279.

Invest in High dividend yielding companies

Surely dividend yielding companies can help provide some stability in difficult times. Nonetheless, running purely on dividend yielding stocks will never be a good idea. As over a period time, stocks are invested into to create wealth to meet our long term financial goals. If say there is no growth in a stock and it just compensates for the loss in growth with yield it is just a trap may be at times.

Invest in companies with high ROCE business

Often similar to mutual funds, we take into account the business past returns and may then try to cherry pick. So, likewise, its not for sure that a stock with past history of good ROCE will perform and continue to showcase good performance. Furthermore, similarly it can also be the case that companies which have not fared well in the past on the metric because of some relevant and strategic change may see improvement despite being low on RoCE earlier.

Going by going stop loss investing

Stop loss are applied strictly to restrict or lower the losses. To explain say you invest in X company at a price of Rs. 100 and then put a stop loss at Rs. 60, so in a case it drops to Rs. 60, your positions in the stock shall be cut and your losses or downside shall be limited. But worth mentioning stop loss investing is for investors that make aggressive bets and assume high risk. For you and me, who are ok with a moderate profile, stop loss investing is not judicial. Further it is for trading, that we engage in applying stop loss.