A lot of investors actively look at trading calls on television or Internet given by analysts or experts or any other person. Some long term investors confuse those trading calls with good investment picks and enter them without taking a look at it’s fundamentals and valuations. Then they get stuck in bad stocks and lose money.

An investor needs to understand the fact that traders can buy any stock at any valuations but an investor cannot. A trader will keep strict stop losses and will exit on a stock correction whereas an investor would keep holding the stock till he gets frustrated with the loss. A trader can buy a stock like Kingfisher also and make money but it’s a disaster if a long term investor enters such useless shares. A lot of times investors keep holding some wrong shares and make very high losses, up to 50-70% also sometimes.

I’m not saying a trading pick cannot be used as investment as traders sometimes even trade at fundamentally strong shares. All an investor needs is a careful approach, look at fundamentals before you invest. If the company does not show good growth and reasonable valuation combination then don’t invest just yet. All you need is some careful research and you’re good.

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