Why New Investors Should Steer Clear of Risky Stock Investments

As stock markets rise, many people start talking about trying to time their investments or worrying about missing out on profits. Take Ritu Mathur, for example—a doctor with limited knowledge about stocks. She’s feeling the pressure to invest more, influenced by all the media buzz. But is it a smart move for her?

For someone new to investing, like Ritu, trying to time the market can be very risky. If she jumps in now and the market takes a downturn after a brief rise, she might end up feeling discouraged. Looking for expert advice online on when to sell is unlikely to help her much.

When stock markets are doing well, they usually go through different phases. First, the market rises as the economy improves and companies start making more profits. Early investors take advantage of this trend. As the market continues to climb, more investors feel confident, and eventually, less experienced retail investors join in. However, it’s hard to know exactly where the market is or how long the good times will last.

Ritu should base her investment decisions on her own financial goals. If she has a steady income and is looking for long-term growth, investing in stocks can help her build wealth over time. Instead of trying to time her investments, she should consider a systematic approach. She needs to be cautious about investing in small-cap stocks just because others are doing it, especially during market booms, as these can be very volatile and risky—better suited for experienced investors.

As a beginner, Ritu should focus on solid large-cap stocks or large-cap equity funds. These are generally less risky and tend to have more stable business models. A common mistake new investors make is buying stocks that have already increased in value significantly. Ritu should resist the urge to jump on the bandwagon and instead adopt a disciplined, long-term investing strategy.