7 Rookie Investing Mistakes and How to avoid them
August 10, 2018 | BY
When it comes to businesses, there are no specific set of rules that will guarantee you success.
There are many different strategies or approaches that might work for you but might totally backfire when it comes to someone else.
However, when it comes to investing in the stock business, there are a few guidelines that you can follow. There are some clear Dos and Don’ts, which you might fail to see if you’re new in the stock world.
Here are seven rookie investing mistakes that rookie investors often make, and how you can stay a million miles far from them:
Day traders are the people who buy and sell multiple shares on the same day. While this might seem like a worthy risk to you if you know a very successful day trader, think twice before you decide to become one yourself.
First of all, day traders need really strong and speedy technology that help them understand the best deals, which you probably can’t afford if you are still new.
Secondly, unless you have a ton of experience in the field, you won’t be able to make the right calls even if you do manage to buy the equipment needed.
When you use borrowed money to buy securities, it is called trading on margin. Many people use it to make extra money when they’re in short of cash.
However, a loss occurring on a stock you bought on margin is much bigger than one occurring in a normal scenario.
Not only do you have to endure the loss, but also have to pay back the loan you took from your own pocket, which is essentially an additional loss. Hence, it is recommended that you do not misuse the power of using margin.
Many people who are new in the stock market, get intimidated by the huge institutional investors and experienced brokers.
However, what you forget is they do not perform as well as they seem. If you invest some time in learning and researching the market, you might actually do much better than them!
A good amount of common sense and intelligence is what distinguishes a good investor from a bad one. If you think you have a good share of those, don’t underestimate yourself just because you have a different 8 to 5 job!
When it comes to the stock business, most people think they are experts at it. That is a big rookie investing mistake. They will proudly discuss stocks in public and brag about shares they think are “about to do great”, which many people are bound to hear.
When you find yourself overhearing such conversations, or see a talk show in which some investment professional does a similar thing, don’t believe them right away.
Do your research, make sure you trust the company and understand why the share might do well. Most of the stocks that you hear about in such scenarios do not do that good in the long run.
Purchasing a stock because it’s price decreased
When a stock that used to have a high price, decreases all of a sudden, you might be tempted to buy it right away. Another rookie investing mistake.
But, beware! There might be very strong reasons to WHY the stock price fell, reasons which might indicate that the price will not go up anytime soon. In the worst case scenario, you might eventually end up with a totally failed investment.
Depending only on technicalities
Nowadays, people depend A LOT on technology to know which stock they should invest in and which they should stay away from. Hours of financial analysis and identifying patterns is usually what dictates a decision nowadays.
Even though these tools are really handy, don’t forget to do a qualitative analysis as well. Unless you take into account the current status of the company at the present time, or how it might change in the recent future, you might end up making a bad decision.
Not accepting your rookie investing mistakes
No matter which profession you are in, you should always have the courage to learn from it and correct yourself.