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10 Mistakes People Make While Investing In Unlisted Shares In India

Being a novice investor in a different asset class necessitates caution in order to prevent unneeded losses. While it may not always be possible to avoid losses, it is always preferable to be aware of the errors people make so that you can avoid making such mistakes that cost you your money. Even worse, it may result in lost opportunities and severe losses if shares are devalued. We have highlighted a few crucial errors that people make while investing in unlisted shares.

10 Mistakes That Investors Make and Should Be Avoided

The following are 10 mistakes that investors and common people make that should be avoided at all costs.

  1. Following the Crowd

    People in the unlisted market often speak among themselves and recommend stocks that they as investors think are good. Never invest in such stocks until you think its good to invest in. Most people don't learn about investments until they've been successful. There is a high probability that the shares of the company that were recommended are already overvalued by the time you think of investing in them. Media outlets like the news and social media can drive stock prices up to unduly inflated levels.

  2. Poor fundamental research

    Investing in a terrible stock without conducting sufficient research is the biggest mistake an investor can make. You run the danger of losing every penny of investment if you invest in a business without knowing about its profitability or credibility of the promoters because they are equities that aren't particularly liquid. After buying the shares, selling the shares of that particular firm would be challenging when their business is doing bad as nobody would want to invest in such a share.

  3. Lack Of Patience

    Lack of patience is another error investors make that should be avoided. The goal of many investors is to become wealthy rapidly. It takes time to trade in unlisted company Shares. You may not immediately enjoy the intended gains of those shares if you're investing long-term. If an investor invests in a company when it was a start-up or an unlisted corporation to when it is a public company, their capital gains are at their highest. Depending on when the investor bought the shares, this could take a few years or possibly 15 - 20 years or more. When the unlisted company expands, an investor will undoubtedly make great money, but expecting large returns immediately would only lead to disappointment. Investors purchase stock shares all too frequently and then want the shares to work in their best interests right away.

  4. No Defined Investment Goals

    Lack of a solid investment goal is one of the most prevalent errors made while investing in unlisted share markets. To accomplish your investment goals, you must clearly state them and use the appropriate instruments. Any objective is acceptable, including accumulating funds for various reasons such as your child's education, owning your own villa, setting up a retirement fund and more but making a proper plan should be your first priority.

  5. Putting All of Your Eggs in One Basket

    Another common error that investors do is to allocate a sizable portion of their funds to the purchase shares of a single firm, only to suffer a loss when the portfolio's value declines. When you place all of your money into one company or investment, a single bad development could ruin your entire portfolio. Diversification helps in distributing your risk and ensures that if some of your stocks decline, others rise and offset your loss, keeping your portfolio in balance. Successful stock investors have publicly reported portfolios that show they hold stocks in a variety of industries and companies. 

  6. Do Not Buy Shares From Non-Reputed Brokers

    You might invest in unlisted shares that have the highest likelihood of producing profits with some assistance of a broker. But it is necessary to make sure that the broker or dealer you are trading your unlisted shares with is trusted and reputable. There are a lot of dealers in the unlisted market and more often than not people end up dealing with random brokers that later turn out to have sold the shares at a higher price than others in the market. Any trustworthy broker must guarantee the supply of shares. In the worst case scenario, if a seller or buyer backs out, the broker is required to instantly repay the investor's whole capital investment or the seller's stock.

  7. Assessing The Share Value Based On The Company’s Present Events

    Assessing a company's value based on the current scenarios and then investing in it can be a huge blunder that one can commit. Unlisted shares can move or fluctuate a lot, so you need to time your investment carefully. Try to invest after doing your research at the proper price in addition to choosing the right firm. It is really important to be farsighted as even if the company is doing well now, that might not be the case a few years down the line.

  8. Relying on Emotions

    When you choose an investment, a number of biases come into play. Another typical investment blunder is to depend too much on emotions in a tumultuous market. If you can't wait a few days to buy or sell a stock, you're probably acting on impulse. Your investment decisions should not be hurried.  In the unlisted market, the less emotions you stir up, the better.

  9. Waiting to Get Even

    Another mistake that you must avoid when investing is waiting to break even. To get even, you must hold on to a losing stock until it reaches its original price. It is referred to as a "cognitive error" in behavioural finance, which means that by refusing to acknowledge a loss, you are losing twice. The first is to refrain from selling the declining stock, which could continue to decline and lose all of its value. Second, you're missing out on the chance to spend that investment money on a more advantageous purchase.

  10. Be Mindful Of Your Wealth Allocation

    More than 40% of one's wealth shouldn't be invested in unlisted shares because these assets aren't very liquid. They will provide good returns, but since a person's financial situation may change at any time, it is advisable to invest according to one's available funds while planning for unforeseen demands.

Closing

In conclusion, these are some obvious mistakes to avoid while investing in stocks. But some of the errors we've talked about will be made by investors. Fortunately, you can embrace your inner adolescence and learn from your errors. The majority of people learn more from their setbacks than their victories.

Always consider the long term when choosing a company to shortlist, and do your research. Don't invest in a firm just because a stock market expert has done so or because it is currently yielding great returns. Once you have decided to wager on a business with solid fundamentals, invest and give your bets enough time to pay off.

Top Unlisted Companies & InstaBuy Companies

Sell or Purchase Share (Tentative Price)

Fundamental Analysis

Company Industry Stock P/E P/B Company rating MCAP (in Cr.) Current Price
Pharmeasy e-Commerce -1.9 1.1 7678 12.5
Reliance Retail Retailing 141.5 23 698659 1400
Orbis Financial Finance - Investment 51.7 11.1 2471 262

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Unique Features

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API Holdings

Incorporated in 2019, The company operates a consumer healthcare app called PharmEasy that enables the home delivery of pharmaceutical products.

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Sterlite Power

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Signify Innovation

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Unique Features

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Chennai Super Kings

CSK is a subsidiary brand of India Cements. This company is quite popular in India as it known for its cricket team.

Unique Features

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Elcid Investment

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Studds Accessories

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Mohan Meakin

Mohan Meakin manufactures alcoholic beverages such as rum, whisky, beer, etc., and non-alcoholic beverages like apple juice, mineral water, etc.

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Orbis Financial

Orbis is recognized as a leading player in the Financial Services Industry, providing Securities Services since 2009 to FDI, Corporate, HNI's.

Unique Features

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Schneider Electric

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Success Stories

How Your Money Can Grow With Us

ICICI Prudential

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130
IPO Price:
334
Listing Price:
310
Absoulte return 138%

1 Lac Invested in ICICI Prudential pre-ipo turned into 2.3 Lac after listing.

ICICI Lombard

Pre IPO Price:
400
IPO Price:
661
Listing Price:
680
Absoulte return 70%

1 Lac Invested in ICICI Lombard pre-ipo turned into 1.7 Lac after listing.

HDFC Life

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210
IPO Price:
290
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344
Absoulte return 64%

1 Lac Invested in HDFC Life pre-ipo turned into 1.6 Lac after listing.

AU Small Finance Bank

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175
IPO Price:
358
Listing Price:
597
Absoulte return 241%

1 Lac Invested in AU Small Finance Bank pre-ipo turned into 3.4 Lac after listing.

RBL Bank

Pre IPO Price:
60
IPO Price:
225
Listing Price:
301
Absoulte return 402%

1 Lac Invested in RBL Bank pre-ipo turned into 5 Lac after listing.

BSE

Pre IPO Price:
200
IPO Price:
806
Listing Price:
1069
Absoulte return 435%

1 Lac Invested in BSE pre-ipo turned into 5.3 Lac after listing.

CDSL

Pre IPO Price:
60
IPO Price:
150
Listing Price:
261
Absoulte return 335%

1 Lac Invested in CDSL pre-ipo turned into 4.3 Lac after listing.

Nazara Tech

Pre IPO Price:
545
IPO Price:
1101
Listing Price:
1990
Absoulte return 265%

1 Lac Invested in Nazara Tech pre-ipo turned into 3.6 Lac after listing.

Dmart Avenue

Pre IPO Price:
280
IPO Price:
300
Listing Price:
616
Absoulte return 120%

1 Lac Invested in Dmart Avenue pre-ipo turned into 2.2 Lac after listing.

Reliance Retail Ltd

Price in 2019:
450
Current Price:
3250
Absoulte return 622.22%

1 Lac Invested in Reliance Retail Ltd pre-ipo turned into 7.2 Lac.

Tata Technologies

Price in 2019:
1100
Current Price:
6350
Absoulte return 477.27%

1 Lac Invested in Tata Technologies pre-ipo turned into 5.7 Lac.

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