Common investor mistakes is an important topic to discuss since there are a lot of new, enthusiastic investors ready to jump in to take immediate action.
Well hold on…not so fast!
To be successful in the stock market, it is critical to not copy what everyone else is doing. The last thing you want to do is make a big mistake that will make you scared of the stock market forever.
You definitely don’t need that!
Having the proper mindset along with educating yourself on this topic can help you avoid making the most basic common mistakes that many people make when starting in this field.
Common Investor Mistakes To Avoid At All Costs
1. Listening to rumors and TV analysts on what you should buy.
I avoid rumors at all costs. I actually enjoy watching TV analysts to get a kick out of listening to their opinions. I mean it’s all just entertainment to me! Once in awhile they may mention a great stock, not previously on my radar, so I would conduct my own research to see whether I should invest in it.
In all reality, that’s only 10% of the time so it just proves my point that you can’t always go by what you hear. If you need someone to guide you, please contact me with any questions you may have.
2. Holding losing stocks while hoping that it will eventually go back up.
“Hope is not a strategy!” Hoping that a stock will magically go back up is not a good plan. You will only be very disappointed if you do not sell the stock immediately to prevent a significant loss.
The popular mistake is to buy stocks while its averaging down instead of going up. This means that as the stock continues to trickle down, people continue to buy more of the stock since they see it as a bargain. Unfortunately in most cases the stock is heading towards zero and does not bounce back up again.
It is profitable to buy more of the stock while it is heading in an upward trend. Now the only trick is how to determine the exact moment to buy before the stock really escalates.
NOTE: There are a few good books that will show you this trick.
3. Not following the rules and buying a stock based on your emotions.
Guessing is not a plan. To elaborate on my previous article, “Misconceptions About Stock Investing”, this is not the same as gambling in a casino where there is only a small chance you can win. Having the right mindset in stock trading will reduce the potential of many avoidable errors. Stay focus on your long-term goals to continue on the path towards greatness.When you follow the rules and do all the necessary research on your stock, you will increase your profits in the stock market. Preparing a plan on how to enter and exit a trade is something to take seriously especially if you are planning for a comfortable retirement.
4. Buying too much all at once instead of starting out in small steps.
It may be tempting to buy every company you see out there but it is best to start in small steps. Since you are in the learning stage and it will take some practice to get a good feel of charts. Once you have completed all the investigation on the stocks, start with only 1 or 2 companies to learn how stocks move in the chart. As time goes on and you are able to recognize winning patterns, you will have the knowledge needed to handle more stocks.
5. Not learning where mistakes were made in each trade to be able to improve in the future.
The only way you can improve on something is if you learn from your mistakes. Yes, practicing is great but to keep making the same mistakes over again does not make sense! After each trade, write down what went well or wrong to figure out the “why”. In some cases you may have to try different methods or conduct better research on your stocks to get better at investing. To accelerate your learning, there are books and courses available to teach you the best techniques.
By Krystle Hall