- Getting anchored to a price
We often set a benchmark price for the shares they hold. This benchmark is usually the purchase price but could also be the highest level touched by the stock. Future decisions on the stock are based on this price.
- Buying more to average
EVERY BODY makes mistakes, but some investors tend to compound them. If the stock you purchased drops, don’t try to buy more shares to bring down your average buying price. Investors often try to cover their losses by buying more of the same shares at the lower price.
- Buy scrips at 52-week low prices
A SLIDING market turns some investors into value pickers. They actively look for stocks trading near their 52-week low. These are perceived as good bargains since much of the downside is thought to be already captured in the price. However, some of these ‘opportunities’ may actually turn out to be value traps.
- Altering your financial plan
A SHARP fall in the market can lead investors to alter their financial plan or investment strategy. Some may be tempted to excessively ramp up exposure to equities to benefit from the market correction, while more conservative investors might deem fit to take out all the money to be on the safe side.
- Stopping SIPs because of the fall
ONE COMMON mistake that small investors make is to stop their systematic investment plan (SIPs) in equity funds when markets tumble. This defeats the very purpose of the SIP. A bearish phase is precisely the time when sticking to the SIP discipline will help you achieve your long-term goals.