So that investing money does not threaten large losses, we talked about common investor mistakes.
Having tried once to invest money in stocks and burnt out with a bang, novice investors consider the whole idea a bad idea and no longer want to try to saddle the stock market. But, like all phenomena, unsuccessful investments have their own reasons. They are basic errors typical of novice investors. Today we will look at and talk about how to avoid them..
1. Dreams, dreams
The first enemy of the investor is high expectations. Having made their first investment in stocks, people expect fabulous profits, and immediately. In fact, this does not happen..
Faced with the harsh reality, the novice investor feels great discomfort due to the large difference between expectations and the current state of affairs. Therefore, at first it is unreasonable to hope for superprofits. Prepare yourself for possible small losses, study the market and correctly form the investment portfolio, due to which you will achieve significant profit.
Greed is considered not the best quality of a person and it is not in vain. It is also better to restrain appetites in financial matters, otherwise wait for trouble. Here are two common examples of greed that make investing in stocks a losing business:
1. Crazy interest, so you need to invest here! It turns out a little later that the money was spent on the shares of the “garbage” company or the pyramid. Think critically and test the market.
2. By all indications, this is a reliable option, so I will spend all the money on it! Again wrong. Even if the tool shows good performance over a long period of time, it’s worth investing no more than 5–10% of savings, otherwise the risk of being with anything will block potential income.
3. Improper risk diversification
In continuation of the previous topic, we will tell you what mistakes the investor makes inexperienced newcomers in trying to diversify the portfolio. The first and most common mistake is the incorrect allocation of shares of the deposit. As mentioned above, do not spend more than 10% of savings on shares of one company, even if they seem reliable. In addition, make it a rule – the higher the interest, the less money you should invest.
The second common mistake is the desire to invest in everything at once. If you want to make money on stocks, invest only in reliable tools. Even if part of your savings is not involved, wait until the moment when other quotes become subject to a stable trend.
4. A superficial study of the investee
Beginners, making investments in stocks, rarely go deep into the features of investment tools. As a rule, the study of the company is limited to viewing the quotation chart and simple manipulations with it. Experienced investors, by contrast, seek to know the maximum about the property..
In addition to financial indicators, they are interested in the scope of the company, the state of the markets in which it trades, business plans and even the latest news that can give an idea of possible volatility. Therefore, do not rush to invest in tools about which you do not know anything. Take your time, take the time to collect, study information and on its basis form at least a general picture about the prospects of investments.
Another mistake is investing in young projects. In fact, only experienced investors with sophisticated intuition and their own system for determining the prospects of deposits can afford such liberties. Beginners should only work with highly reliable tools, otherwise the risk of losing money increases many times.
5. Fears constrain opportunities
Almost every novice investor has two qualities – increased greed for profit and excessive fussiness due to the fear of losing money. The advantage of experienced colleagues is the optimal balance between both of these qualities..
The first investment in stocks of your life should not be made without a clear understanding that trading without drawdowns does not happen in principle. Even trading gurus who receive a stable profit are mistaken and lose in some positions, not considering this fact to be shameful. Untimely fussiness and emotionality caused by the desire to save money often leads to the fact that due to insignificant drawdown the investor suffers losses, sells assets along the way, losing the opportunity to earn.
Therefore, take your time until such a decision is determined by specific reasons. Do not be afraid to enter the drawdown if its level does not exceed reasonable limits. Perhaps after a while a losing position will bring income.
6. Waiting for better times
There are no good or bad points for investing in stocks. There is only the inability of the investor to identify a trend with sufficient potential for investment. Therefore, the periods during which contributions to any tools seem meaningless are just evidence of a lack of knowledge, skills and experience.
We do not urge to invest money in such moments at least somewhere. On the contrary, such actions are frivolous and are likely to lead to losses. On the other hand, it’s also not worth waiting for a successful conjuncture from time to time, because every time you miss the opportunity to earn.
Try to delve into the market processes, pull up the theory. With each such occupation, “empty” days will worry less and less. Over time, each market situation will seem understandable, which will increase income and your self-confidence.
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