Being an investor in Indian stock market for a fifteen+ year, I have seen many people and myself making many mistakes people have outlined in this post. I think it is good that some people have openly accepted their mistakes, and it is a great way to start learning as one cannot progress much if he does not accept/acknowledge his mistakes.
I have come to a conclusion that one cannot avoid mistakes, they are part of a process . The most important things about mistakes are what we learn from them. I think this is an excellent post for any newbe investor as he would get a quick glance of mistakes to avoid (and what NOT TO DO) in the stock market.
Here are my few things I have observed many successful investor do (I am still learning ):
1- If one is in the stock market to make quick money, he would be disappointed. He may earn good money in few trades, but it will be a “Beginner Luck” or may be pure luck. And luck does not last longer. I use is a gambler's analogy to make a point. Suppose a gambler start gambling in a casino and start winning. On every win he increase/doubles his bets. If he does not take money out of the table, he may win 100 bets, but it will need just one bet to break him.
2- Hunting for multi-bagger in a bull phase is a recipe for disaster. Hunting ground for them is when the market crashes (like 2001, 2008). It is not that we cannot find multi-bagger, but the odds are stacked against the individual investor.
3- Rakesh Jhunjhunwala has said that “You cannot become rich on borrowed knowledge.” If you are in it for a long term, spend time learning various mental models about the stock market.
4- Be skeptical about management, analyst and whoever is promoting their stocks. More often than not, they have the incentive to promote/sell stock.
5- As an individual investor, you have an edge in term of timeframe. Mutual funds or portfolio investors needs to show returns on a yearly basis. If the stock is going through correction phase and if there is uncertainty about it’s earning, that stocks get dumped heavily. It is a hunting ground for good stocks.
6- Remember what is a skill and luck and play accordingly. If your earlier win is on luck, be true to yourself.
7- Active vs passive. Fidelity (biggest US mutual fund) has done some study of the best investor in the stock market. As per the study the best investors are dead people and who forgot that they have an account with Fidelity (means they did not trade in the stocks). Buying and selling just add to cost and taxes, but not much to returns. By frequent buying and selling, one is making his broker rich.
7- Read, read and read. There is a lot of noise in the media (TV/Paper). Be wary of them. You will real understanding by reading classic investing books. There are many good books, and I am sure they will be mentioned on this website, so I don't repeat them.
Remember Charlie Munger's quote: “I have known no wise people (over a broad subject matter area) who didn't read all the time-none, zero. You'd be amazed how much Warren reads-and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out”
All the best.