Market veteran Shyam Sekhar says most DIY (do it yourself) investors end up losing money as they prefer trading over investing; they participate blindly in 'IPO lotteries'; and they sell winning stocks while clinging on to losers. These are the three mistakes, Sekhar said DIY investors make and quit stock investing itself mostly within two years.
Sekhar, the founder of iThought Advisory, said with DIY investing comes enormous responsibility. Sekhar said in each passing market cycle, the number of investors coming to the market as DIY investors is growing exponentially. But many of them leave Dalal Street due a few mistakes.
The first, he said, is investors prefer trading over investing. "Nowadays, new investors only want to do options trading. In earlier time, they used to buy and sell on the same day i.e. intraday trade. Then, we also have people who buy today, sell tomorrow. Whatever is the form, I have observed that most people lose money ad leave the market. Usually the cycle does not last two years," Sekhar said.
The second reason he thinks make investor leave markets is the IPO lottery. "They play the IPO lottery. Everybody wants to subscribe to IPOs. They believe that this lottery will make them rich. How many people can actually say they have become richer regularly by participating in lotteries? The IPO lottery is a place where most investors lose money and a few people gain," Sekhar said.
Sekhar said those who gains are the ones who pick IPOs selectively and those who try hard to become rich are the ones lose the most. "Those who prefer IPOs generally end up getting allotment in wrong companies," he said.
The third mistake DIY investors make is holding on to losers. Sekhar said most investors tend to sell their winners and hold on to their losers in hope someday the losing making investments will turn positive. Many of them see the stock they sold earlier seeing a strong momentum later.
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