People who are not well-versed with the stock market often consider it a gamble and thus, treat it like one. Stock market trading is not a gamble, rather investing in it is the art of taking well-calculated and researched risks. Sometimes, this gamble approach happens inadvertently, and it is best to identify and fix it as soon as possible.
Signs that you are gambling in stocks
To avoid taking the gambling approach in stocks, you must look for potential signs and then try to avoid them. Following are the five common signs that you may be gambling in stocks:
- Not doing your own research
You must invest in the stock market based on your fundamental understanding or with the help of a certified investment advisor. Stock markets are subject to risks and therefore, taking the advice of unauthorised professionals or not doing the research yourself beforehand could cost you your savings and result in a loss of your returns.
- Taking decisions on short-term market twitches
Another sign that you are gambling in stocks is if you are taking your investment decisions based on short-term news that you heard or read somewhere. Acting on such ‘tips’ could lead to an increased risk in your investments. Therefore, the long-term performance of your stocks and your financial goals should be your point of focus.
- Investing all in a single stock
This is the worst form of gamble you can take in stocks. You should never put all your eggs in a single basket. Numerous factors affect the returns of a stock, and if it does not perform well due to any of the factors, you could suffer significant losses. Always remember to diversify by investing in different stocks and securities and hedge against the risk of your investments.
- Using emergency funds for short-term trades
Even though a trade appears to be safe, one must never use their emergency funds for investment, as the outcomes of a trade are unpredictable. It is wise to always use your surplus amount while investing.
- Investing by way of aping other investors
Aping other investors’ investment decisions is one of the evident signs of gambling in the stock market. The resources available to big players are different from that of the rest, and therefore, blindly investing based on their strategy is gambling. Also, it is hard to predict the consistent strategy of a big player in the stock market.
Conclusion
While the stock market can be an exciting and engrossing space for trading and investing, it’s possible to develop an addiction to it. If you believe there are signs that you may struggle with stock market addiction, you should reach out to your family, peers, or professionals to seek help to deal with this.
Conversely, if you feel like you’re gambling in stocks because of lack of knowledge, remember that the knack of trading in stock market comes with experience. For expert advice on stocks, you can connect with a financial advisor who can help you invest effectively and efficiently to meet your goals.