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Psychology plays a part in whatever decision we make, including investment in stocks. Sometime our built in psychology is helpful and many a times it is not. When psychology is not helpful we call them psychology traps. Investment in stocks is also guided by few psychology traps which influences us in making bad investment choices and lose money. Since on most occasion we are not aware of our psychological built up which guides us in taking bad investment decisions, chances are we keep on repeating such mistakes. If we are aware of them the probability of bad investment decisions reduces considerably. Let us look at some of these common psychological traps in which we unknowingly (most of the time) get entrapped. Psychological Trap No.1: Becoming a Blind Fan As people love to be in there comfort zone, they get attached to some of their choices of companies in which they have invested. In 1990s, UTI was the biggest mutual fund in India and its products were a rage. One of its pro...

I do not know what kind of shoes Warren Buffet wore. However, I am sure that a lot of people would definitely want to be in his shoes. I am not in a position to promise his shoes to the readers, what I can do is share a few timeless investment principles which if followed, will surely give the investor a firm standing, as firm as Buffet’s, no less. Warren Buffet owed his financial grooming to his mentor and teacher, Benjamin Graham. Concepts like security analysis and value investing acquired a new dimension under Graham. His timeless books on investments – Security Analysis (1934) and The Intelligent Investor (1949) provide an insight into the realms of investment dynamics. In the following paragraphs the essence of his teachings are laid out for the modern day investor to reap its benefits. Principle I: Invest with a Margin of Safety Better be safe than sorry. In financial-investment parlance, ‘margin of safety’ signifies buying of securities at a discount to its actual worth o...