Biggest Mistake is simply following Trend
We have seen a classic example of this irrational investor behaviour in the last few weeks.
Till the first week of May, we witnessed an unprecedented one-way rise in the stock market for almost six months.
Valuations were stretched. Experts were advising caution. But people had forgotten that markets do fall. So they kept buying.
Why?
They were afraid that if they did not buy today, the prices would go up tomorrow and they would have missed out. It was a case of panic buying.
Then we saw a market crash.
The Sensex fell almost 1500-1600 points.
Now, people were selling as if there was no tomorrow.
Fundamentally, the economy still looks pretty solid. The expectation of corporate growth is promising. So there is no reason to believe that the shares have lost their basic value. This is just panic selling.
If we look at our investments from the fundamental perspective, we will not buy when everyone is buying and the market is over-valued. Similarly, we will not sell just because everyone is selling.
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