Stocks are always one of those enthralling assets when it comes to investment and also one of those riskiest assets and profitable. That’s why everyone embark on this growth oriented platform stock market. Everyone comes with a great expectation of making a significant corpus. Now we always have two basic options for making money in stock market realm either you go for trading or investing.

You hold the identity of trader or investor or you can be both. Such one of the great example of those investors is warren buffet the founder of Berkshire Hathaway Inc. we all know and one of the most famous traders is jims Simon the founder of Renaissance Technologies LLC. But why I’m sharing the information on trader and investor because that’s the crucial path we take on the journey of stock market.

In this article we will be aware of the delusion and misapprehension of stock market because every beginner goes through this because often what do not need to know is as important as what we need to know. Here I will not only discuss the delusions but also rights things to do. Let’s begin to uncover the first misconceptions on stock market with a beginner friendly approach.

 

 

1. Information to avoid

News, friends & family from many more resources are there where a beginner starts, and probability of having information is too high there. Because now two things you have for sure one is excitement of stock market and full of bombarded information, where you are unaware which one to trust.

Tips & floating information helps when you are lucky but not for a consistent period. In stock market you can’t rely on someone to give tips. That approach does not work well. Telegram, What’s app groups, on social media there are full of excessive information but have you ever wonder why they are giving tips, why they are not putting their own money and telling you put your money that simply means you are the money for them “pump and dump” happens this way.

Don’t even trust big heroes of stock market. Two things kill you in stock market GREED and FEAR Greed where you lose what is your own and fear where you lose what you could have. Penny stocks are one of those cool looking misconceptions. Here I’m assuming you know what exactly this penny stock is. It’s those cheap one whose market cap is very low like 10cr. 20cr. 50cr like that stocks trades at like 2.00, 3.00, 10.00, 50.00 easy understanding.

I’ve seen people get too much interested in penny stocks because it looks cheap and cool because of it’s quantity. Let’s get an example, you got 1 share of “CIPLA” for 1000 on the other side you got 1000 shares of “Baburao water plant” at 1000 rupees. At this case CIPLA is a well-structured well marketed strong blue-chip company and baburao water plant comes with cluttered financial statements no strong sales no good profits, and cash flow does not  come from sales. People(Mostly beginner) will jump into baburao water plant instead of CIPLA.

Because phycology for those beginner get excited by number of quantities they are provided. We need to understand one thing if 30% hike you get at baburao as well as CIPLA, we will get the same amount of returns on both which is 300 and risk is way higher  in baburao. Now is the penny stocks still look interesting. Avoid penny stocks. Invest for long term in companies you believe.

 

“ It’s always better to earn 1 rupees from your own comprehension & decision than to earn 10 rupees from tips and misinformation because now you are close to losing 100 after the conviction 10 rupees”

 

 

2. Hopping onto running horse

Let’s imagine you are at your home and suddenly something happens, you found yourself on a horse running at 70 km/h. Now in this scenario most probably you will fall and hurt yourself. That’s exactly what you do when you buy a running stock. You buy with the conviction that it ran already 6 miles so it could go 10 also but still you have no idea when and at which number it will stop for you. And just right after you buy you realize horse started running backwards.

Yes backwards! Because it’s not a horse race.  It’s the emotionless stock market. It goes forward it goes back ward it goes sideways. Let’s come to real life examples when a stock is rising everyone show their interest. Thinking the stock is doing well without knowing fundamentals of that stocks. You can find end number of people who invest in stocks without even knowing what actually company sells, what’s the revenue chart, where company is getting it’s cash flow is it from the revenue, funding or asset selling?  Or what?

You must ask these questions. Always avoid buying a rising stock because you don’t know when it will fall. I remember a line from warren buffet the 1^st rule “Don’t lose money” and 2^nd rule was “Don’t forget the rule one.”

Reasons being once you lose what’s your own now just to get it back you have to earn way higher returns that might not even you thought of just to be in break even. Someday we will understand the calculations behind this, at this article I’m making sure it’s beginner friendly.

“Two rules here, the one is always abstain from taking entry when a stock is rising because you already left the train although there are sophisticated calculations behind this. Which we will understand in an advance article. The 2^nd one is remember Warren Buffet’s first rule”

 

 

3. Putting stock market on pedestal

You do 3 things once you come to stock market. First you come because you want to build your career here. Second you come here because you simply don’t want to lose stock market returns you want build a corpus through stock market like most people. Third you come because you see other people such as your friends or family are investing here you have no understanding why you came.

You just came for so called “FOMO” this is excessively risky. But why is this? I have seen people who wasted their life on stock market. This statement is so paradoxical. How would someone waste their live on stock market? It’s because they don’t have crisp wants about stock market. If you are the 2^nd person please focus on your own domain see investment as investment if you are an engineer focus on your on domain and by side just know the essential understanding of stock market.

Trust me you don’t need to be expert to gain expert return you just have to few basic principles like as we are sharing. If you ever read the book “Phycology of money” you know there was a janitor ( A caretaker) just think what would be the social status of a janitor but you won’t believe when he passed away he left with 8 million dollars at that time. He was Ronald Read, used to be a car mechanic & a janitor he used to invest in large growth cap stocks and once he would invest he would not touch them. He had no formal financial education.

If you want to build your career in stock market that’s a different thing you can go if you have idols like “Rakesh jhunjhunwala” in that case you must know what you want. Whenever someone says that you can be millionaire with options or intraday don’t just rush into do a proper study about it. As you on these stuff success rate is like 1% or 3% so  you must be confident that you could be one of them.

My straightforward understanding is to become financially free you don’t need to be highly intellectual you have to be discipline at what you are doing and you also need to have strong ethics and principals that will make you be concentrated. Last but not the least you must have the understanding what you want from market.

 “ Stock market is just as it is, it won’t listen what you want nor you can control it. So best thing we can do is becoming a discipline investor who has a crisp understating what he/she wants!”

 

 

CONCLUSIONS:  I always believe in this “Invest in right one at right amount at right time, keep giving, keep investing.” Someday we will discuss why time & amount also matters. Learn to read Income statement, balance sheet, cash flow statement. Always validate these paper’s dots getting connected or not.

Such example is like check the income statement what’s the position of last few years’ sales (Revenue) and see the cash flow where the money going how company is utilizing its assets and money. And always make sure you are buying when the stock has adequate selling pressure. If stock market is not your calling then don’t put all your energy here, keep it as investment just with a proper disciplined. You are still reading somehow I can predict you have got a bright future towards investment. Hope I made this time valuable for you.  Wish you a good luck!

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