The stock market is a hot topic for new investors of all ages. More and more people are wanting to work on their financial situation through smart (or risky) investments. Are you joining in on the trend?
If the stock market is new to you, it’s easy to get overenthusiastic and make some serious mistakes with investing that would be otherwise avoidable. You don’t want to end up like one of those people who “wins big” one day just to lose everything the next!
We want to help. Keep reading to learn a few mistakes that you want to avoid that are common for new investors.
Investing More Than You Can Risk
While investing is a good idea for everyone who’s willing to put in the time, not everyone has the money to be throwing into the stock market without care.
When many of us are living paycheck to paycheck it isn’t feasible to be investing hundreds per week, even if the payoff could be good. Things can turn in an instant and you could lose all of that money.
Budget out your weekly or monthly income and see what you can spare after all of your bills, necessities, and some “extras”. Don’t put yourself in a worse financial situation by trying to put yourself into a better one.
Not Putting In Research
Some stocks can be considered “safe stocks”. These are stocks from established companies that have a steady increase over time. Some industry powerhouses are reliable enough to throw money at without much research beforehand.
The stocks that are going to net you the most potential gain in a short time, though, are likely to be newcomers. This means that they don’t have the established trust and they aren’t in our cultural “information bank” (like businesses like Disney or Apple would be).
This is where research comes in. When it comes to anything new and exciting, looking into the cost, cost changes and the overall history of the company is crucial. How do they make their money? What does their stock price depend on?
Not knowing these things can lead to you making foolish decisions.
Some of the most profitable stocks have a slow rise over time. You may put money into it in 2020 and not take it back out until 2040 or beyond. You need to understand that through that time there may be small dips or rises but you can benefit more from hanging onto it.
This also means it’s not a good idea to buy as soon as something makes a small dip in price.
Daytrading can be profitable but it takes more attention and effort than normal trading. When you’re setting investment goals you need to be ready to exercise patience.
Following the Crowd
The moment that you recognize that everyone is hopping onto the same stock it’s probably too late for you to follow suit.
This isn’t a universal truth, but unless you have your finger on the pulse of the stock in question you’re going to miss the boat by waiting for everyone else to move. You might still benefit, but you won’t have the same results as if you’ve just been attentive on your own.
Do These Mistakes with Investing Sound Familiar?
It’s normal to make a few mistakes with investing here and there when you’re getting started, but unless you have excess money to lose you’re going to want to keep your errors to a minimum.
Investing is great for your future, but you can also work your way into financial ruin in no time. Be careful out there and invest wisely.
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