5 Common Mistakes First-Time Investors Make

Man shouting at declining graphsIf you’re planning on investing, and it’s your first time, take the time to read this before you make your first move. Investing is a tricky business and only the well-educated rise to the top.

#1 Going in unprepared

As a first time investor, we know you just can’t wait to get started. However, it’s important that you come in prepared so that you won’t make too many mistakes and get discouraged later on.

A great way to prepare yourself is by getting a personal investment plan. This helps you find out what you exactly want, including the amount of capital you’ll invest in a particular trade, how you’re going to go about diversifying your portfolio, how much you will invest in a certain trade, how much you’re willing to lose. It will also help you see all the potential risks. Getting a plan will give you a wall to lean on in times of doubt.

#2 Making an uneducated decision

Never skip on the research. No matter how lucky you think you are, guessing is a sure fire way to lead you to your downfall. Rely on stock market data and reliable channels of information to make decisions. Some examples of reliable sources for data are The Wall Street Journal and The Financial Times.

#3 Not mastering the art of risk

There are two ways that you can make risk-related mistakes. The first one is where you fail to evaluate your risks properly, resulting in making moves you didn’t see had a high risk of failure. The second one is where you think about the risks too much, thereby paralyzing you in fear and depriving yourself of lucrative investments because you were too afraid to fail.

You need to achieve a balance where you’re equally sensitive and confident. This only comes in due time. For a start, invest in safe bets like blue-chip stocks. Continue to work your way up once you start getting the hang of things.

#4 Not being able to determine what is too much

When you are still learning the ropes of stock market investments, a good strategy is to only invest in the money that you can afford to lose. You can lose everything in a blink of an eye, so separate your reserves from the money you plan on investing with. Make sure you have something to fall back on when all goes wrong.

#5 Thinking of investment as a get-rich-quick scheme

Investing in stocks will not make you rich overnight. It’s best if you see it as something that will provide you wealth spread throughout a long period of time. Seeing it as a get-rich-quick scheme may cause frustration once you see it for what it really is.

This may lead you to make bad decisions in an attempt to make a quick and easy buck. This mindset will not give you your much-desired wealth. If anything, it’ll give you a swift and easy way to exit the marketplace.

Stay educated, build your confidence, make smart decisions, and go about it in a slow and steady pace. Do this, and you’ll be alright.

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