Making These 4 Behavioural Mistakes While Trading & Investing? You Could Be Hurting Your Returns!

Investing in stock market is a roller coaster of emotions, driven by both external and internal factors. However, fear or excitement with an urge to follow market trend can lead to impulsive decision-making and further hamper your investment. Understanding these pitfalls can help investors make more disciplined decisions and stay focused on their long-term financial goals.

"Trading and investing are not only about numbers, charts and market movements. They are also about human behaviour. Every buy, sell or investment decision is made by a person, and people can be influenced by fear or excitement," said Milan Parikh, Managing Director and Chairman at Jainam to GoodReturns.

Parikh recommends to avoid four behavioural mistakes which investors often take. Here is the full excerpt from Milan Parikh, Managing Director and Chairman at Jainam.

Four behavioural mistakes investors often make

Panic Selling: Letting Fear Drive Investment Decisions

Panic selling is perhaps the most familiar. When a portfolio falls sharply, selling can provide immediate emotional relief. But it also creates another decision, such as when to reap its benefits or to immediately hop on the next investment cycle. Waiting for the "right" time
can mean missing the recovery.

2. Chasing Rallies: Buying Into the Hype

Chasing rallies is the other side of the same emotional cycle. An asset that has risen sharply can suddenly seem impossible to ignore, particularly when friends, social media and financial content are all talking about it. Buying simply because something has recently performed well can mean entering after much of the price movement has already happened.

3. Overtrading: Mistaking More Activity for Better Returns

Overtrading can also become a problem. With markets and information available throughout the day, it is easy to react to every movement. More activity, however, does not necessarily mean better decisions.

4. 1. Market Timing: The Challenge of Getting Both Entry and Exit Right

Trying to time the market combines many of these behaviours. It requires getting both the exit and the re-entry right. In hindsight, market turning points can look obvious.

Information can help, but it can also influence behavior, said Parikh.

Investors today have access to more information than ever before. Social media platforms such as YouTube, Instagram and X were the most prominent source of investment awareness among respondents. The media naturally reports on sensational events, whether geopolitical risks, wars or artificial intelligence. Stock markets, by contrast, focus more on economic trends. As a result, it is important to pay more attention to out-of-the-ordinary reports than to everyday news. This can affect our perception.

Markets will keep moving. There will be days when a falling portfolio creates the urge to sell, just as there will be days when a rising stock makes us want to jump in. The important thing is to recognise these reactions for what they are. Investing is not about getting every decision right or predicting what the market will do next.

Take a step back when fear or excitement takes over, stay focused on the goal, and resist the pressure. Sometimes, the most sensible financial decision is not to do more but to stay patient and let time do its part.

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