If You Want To Make Money From Stocks Don't Do This

We often hear professional money managers, investment bankers say: Indian stock Markets, on an average, generate a return of 15% annually, over the long term.It almost sounds like just by opening a demat and a trading account your money will grow at 15% per annum.I dont think so. Imagine if you had invested in these 4 stocks in the past 5 years.Forget annual returns, these companies havent even generated a total 5Yr. return of more than 15%.Company 5Yr Return BSE Sensex 5Yr. ReturnAmbuja Cements Ltd. 13.03% 70.7%Tata Motors Ltd. -56.2% 70.7%PTC India Ltd. 11.7% 70.7%Lupin Ltd. -24% 70.7%Source: Google Fin. There is no such thing as making easy money when it comes to investing in individual stocks. It will be like mastering all the swim strokes on the very first day.Investing is Simple. If you follow a few certain dos and donts. Develop a discipline and spend some time doing research.Lets look at it from a different prospective. What should an investor not do when it comes to making money from stocks. Trading, buying and selling a stock frequently is literally like setting yourself up to lose. It is an important purchase and should be treated like one. You dont change your furniture every month. Buy stocks whose businesses you truly believe in. Buy them cheap and wait for the turnaround patiently. If the fundamentals are strong, the stock price will reflect that soon enough.Moreover, trading frequently increases your costs. The brokerage and the short-term capital gains tax (15%) eat up into your profits at a very fast pace. When looking at stocks, keep in mind, costs are as important as the return expectations. Dont sell just because the price has gone up or down. But give it some serious thought.You know the fundamentals of the company are strong. You have done your research before buying it.Imagine having invested in Biocon @156 in 2015. The stock didnt perform well until 2016. And you sold thinking it hasnt given any returns as such by March2016. It had doubled by the end of 2016 to Rs.310 and is now trading at Rs.610.Stock price movements dont always indicate the true picture of the fundamentals of the company. If you think, something is seriously wrong, look into the issue, understand the crux behind the movement in price. Dont get swayed by the quarterly results. Dont buy a stock unless you understand the business inside out. Taking the time investigating before buy a stock will help you avoid the biggest mistakes.Imagine having invested in Tata motors. It belongs to one of the oldest business houses of the country. We are sold on the India consumption story. The companys heavy commercial vehicle business is something we cannot miss. Everywhere you go you see a Tata Motor trucks carrying goods. But what youre missing is that more than 70% of the companys profits comes from its international business since they acquired JLR. This information is readily available to every individual. it is mentioned in the annual report published and posted by the company on their website. Finding a good company is like winning only half the battle. The other half relies on buying it at the right price.We all understand that Nestle is one of the top companies in its sector. But whoever believes that its worth buying at (P/E ratio) 65 times of its earnings will have a tough time making money in the stock. Buy when you feel you can build a margin of safety. For instance, buy it at 30 times the earnings so if it doesnt perform as expected you have a built-in cushion. Yes, the stock will surely grow at a normal pace but youre better off investing in a stock where you find deep value.I can honestly, say I have made all these mistakes as a new investor. A beginner. And you might also. But keep a few things in mind. Do your homework, understand the business in and out and dont get swayed by popular opinion. If you develop a basic framework for investing and stick to it youre most likely to do well and probably not repeat the mistakes I made.