Biggest Regret for Investors in the stock market

What is the biggest regret an investor can have in the stock market?

For many, it’s selling stocks when the market is crashing. Like last year when global markets crashed to multi-year lows.

Businesses were shut, countries were locked down. There were predictions of doom’s day. The pandemic could either kill humans in large numbers or economies around the world could go into ‘great depression’.

Nothing of that sort happened. In fact, the market crashed and recovered pretty quickly.

Those who sold out of fear, were selling shares at throwaway prices. From the bottom last year, most stocks have doubled or tripled in value.

For those who sold, that’s a big regret. But is this the ‘biggest regret’ for an investor?

Not really.

Nifty is still only around 15% higher than its pre-Covid levels. Even if you invest today with a long-term view of 10 years, you should still earn healthy returns out of the market.

So, what then is the biggest regret an investor can have in the stock market?

Biggest Regret for investors in the stock market

Personally, for me, it’s been buying a quality company and then selling it for a small profit – only to see it rise 5-10-20 times over the next few years.

This has happened to me quite a few times. A recent example is ‘Deepak Nitrate’ which I bought at around ₹ 200 back in 2017 and ended up selling it for around ₹ 450 in February last year. I had my reasons for it. The gains were huge too.

But the stock has gone up nearly 4 times since then.

Being patient and riding winners for long periods of time, is an important skill every investor should learn.

A new investor is usually impatient with his winners and tends to have much more patience when it comes to losers. Many people are holdings stocks like Reliance Power, Suzlon, Yes Bank etc. even though they are in huge losses.

Think about it.

Which of the two is better?

  • Bought ‘Yes Bank’ for 200, current market price ₹ 20.
  • Bought ‘Deepak Nitrate’ for 200, sold at ₹ 450, current market price ₹ 1800.

Let’s assume you invested ₹ 1 lakh in both companies. Even though you lost 90% of your investment in ‘Yes Bank’, you lost nearly ₹ 7 lakhs in ‘Deepak Nitrate’.

There is another problem. When ‘Deepak Nitrate’ was sold for ₹ 450, the money which comes from this has to be invested in some other stock.

If that doesn’t perform or is showing a loss, the regret becomes even bigger.

Key takeaways from this article:

  1. Think twice before selling a stock which has performed well in your portfolio. It could go on to be a much bigger winner. If the allocation gets uncomfortably large, you can sell a few shares and bring the allocation down.
  2. Sell only when you have a better alternative investment.
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