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Top 7 Mistakes Beginners Make While Investing in Stocks (And How to Avoid Them)

Are you new to the stock market? Learn the 7 most common investing mistakes beginners make in NEPSE and global markets—plus practical tips to invest wisely and avoid losses.

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Nepalytix
Top 7 Mistakes Beginners Make While Investing in Stocks (And How to Avoid Them)

Introduction: Investing Is Easy—But Doing It Right Isn’t

With mobile apps like MeroShare, access to TMS trading, and frequent IPOs, it's easier than ever for Nepalis to invest in the stock market. But while getting started is simple, staying profitable is not.

Many beginners fall into emotional and strategic traps that lead to unnecessary losses. In this guide, we’ll explore the top 7 investing mistakes beginners make—and most importantly, how to avoid them.

“Smart investing is not just about buying shares—it’s about avoiding the wrong moves.”

✅ Mistake #1: Investing Without a Plan

Many new investors buy stocks just because:

  • Friends or YouTubers recommend them

  • Prices are rising and FOMO kicks in

  • IPOs are trending on social media

But investing without a plan is like flying blind.

🔍 Why It’s a Mistake:

  • No clarity on risk appetite or time horizon

  • Random buying leads to poor returns

  • Panic selling when market corrects

💡 How to Avoid:

  • Define your financial goals (retirement, home, education)

  • Know your investment horizon (short vs. long-term)

  • Choose sectors/stocks that fit your plan

  • Start with a diversified approach, not concentrated bets

✅ Mistake #2: Chasing “Hot Tips” and Rumors

Many new NEPSE investors fall prey to:

  • Telegram and Facebook groups

  • “Insider news” about bonus shares or dividends

  • Unverified rumors about MoUs, mergers, or acquisitions

🔍 Why It’s a Mistake:

  • Market manipulation is common in small-cap stocks

  • Rumor-based stocks often spike and crash

  • You become the last buyer in a pump-and-dump

💡 How to Avoid:

  • Rely on official sources: NEPSE, SEBON, company websites

  • Study company fundamentals: EPS, net worth, P/E ratio

  • If everyone is talking about it, it’s probably too late

✅ Mistake #3: Overtrading and Timing the Market

Many beginners try to buy low and sell high—every day.

But constant trading leads to:

  • High transaction costs (broker fees, TDS)

  • Emotional decisions based on short-term charts

  • Missing long-term compounding

🔍 Why It’s a Mistake:

  • Day trading is risky and emotionally exhausting

  • NEPSE has low liquidity and limited tools compared to global markets

  • Most retail traders underperform the market

💡 How to Avoid:

  • Stick to a long-term strategy

  • Review your portfolio monthly—not daily

  • Use swing trading cautiously, only if you understand technicals

✅ Mistake #4: Ignoring Diversification

Putting all your money into:

  • One sector (e.g., hydropower)

  • One company

  • Just IPOs

...is a disaster waiting to happen.

🔍 Why It’s a Mistake:

  • Sector-specific risks (e.g., regulatory, weather, earnings drop)

  • One bad stock can wipe out years of gains

  • IPOs don’t always guarantee listing profit

💡 How to Avoid:

  • Diversify across sectors: banks, insurance, energy

  • Mix large-cap and mid-cap companies

  • Keep some allocation in mutual funds or FDs for stability

✅ Mistake #5: Not Understanding What You’re Buying

Would you buy a house without checking the neighborhood, structure, or documents?

Many investors buy shares without knowing:

  • What the company does

  • How it earns profit

  • What risks it faces

🔍 Why It’s a Mistake:

  • You won’t know when to exit if things go wrong

  • You’ll panic when prices fall

  • Blind investing = gambling, not wealth building

💡 How to Avoid:

  • Study the company’s business model, revenue, and profit history

  • Read annual reports, dividend histories, and AGMs

  • Use platforms like Merolagani, ShareSansar, and NepalStock.com for research

✅ Mistake #6: Selling Too Early (or Too Late)

Many beginners:

  • Sell too early after a small profit (e.g., 10%)

  • Hold losers hoping they’ll recover someday

🔍 Why It’s a Mistake:

  • You cut winners short and let losers grow

  • You miss out on long-term compounding

  • Emotional attachment replaces logic

💡 How to Avoid:

  • Set target prices and stop-loss levels

  • Review performance every quarter

  • Learn to book profits gradually—use the “sell in tranches” strategy

✅ Mistake #7: Ignoring Taxes and Documentation

Many investors don’t:

  • Track capital gains

  • Collect broker CGT certificates

  • Include investments in annual tax filings

🔍 Why It’s a Mistake:

  • You may face penalties from IRD

  • Can’t claim tax benefits or refunds

  • Poor recordkeeping affects future decisions

💡 How to Avoid:

  • File capital gains tax correctly (use broker CGT slip)

  • Track your portfolio in Excel or an investment app

  • Include NEPSE earnings in your annual PAN filing

✅ Bonus Mistake: Emotional Investing

The market moves up and down. If you follow:

  • Fear when markets fall

  • Greed when stocks rise

  • Social media hype...

...you’ll never win.

💡 Solution:

  • Build emotional discipline

  • Read books like The Intelligent Investor

  • Trust long-term data over daily noise

How to Start Investing the Right Way (2025 Edition)

Here’s a beginner-friendly checklist:

✅ Open a DEMAT + MeroShare + TMS account
✅ Set a monthly budget for investing
✅ Start with blue-chip stocks and mutual funds
✅ Use tools like ShareSansar, MeroLagani, or Nepalytix
✅ Track your performance quarterly
✅ Reinvest dividends
✅ Learn continuously

Conclusion: Avoiding Mistakes Is Half the Battle

Smart investors don’t just pick good stocks—they avoid bad habits. In Nepal’s fast-changing stock market, the path to wealth isn’t about shortcuts. It’s about discipline, patience, and learning from others’ mistakes.

“The best investor is not the smartest—just the most consistent.”

Avoid these 7 mistakes, build a diversified portfolio, and you’ll be on your way to financial freedom.