Are you planning to try your hands in stocks, shares and other lucrative investments? That’s great, but you should know that the investment market can be quite tedious. Thus, any faux pas here could mean a heavy blow to your potential dreams. While investing is no rocket science, it also involves smart strategic planning for survival. This post offers insights on the typical mistakes made by investors while investing for the first time, so that you chart your steps carefully.
- Excessive margin
The borrowed money meant to buy securities is called margin. It’s important when you are hopeful to increase your funds, but it might exaggerate the losses as well if the investment does not fare as expected. A common mistake among amateur investors is to root for an excessive margin that apparently looks like free cash. When you borrow a margin, be watchful about your positions given the staggering losses or gains, which are natural with minor shifts in price here. If you do not have the adequate knowledge to stay watchful and the positions suffer a drop, your brokerage agency would sell the stock to cover up the losses accrued.
- Buying based on random hype
Amateur investors often make the grave mistake of buying on random hype. You might hear your friends or relatives going gaga over some stock and you immediately rush to buy it. While the said stock may have huge potential, it may not as well. Just because a group of people are expecting killer results from a certain stock doesn’t imply that it has to be that groundbreaking in the real sense. When you witness a hype, remember it’s all about individual perceptions and might not bear an exact connection to reality. So, your work is to carry a thorough research on the hyped stock to check whether at all it would be right for you. Also, make sure to discuss with unbiased seasoned investors and financial advisors prior to investing the stock. The bottom line is, don’t just follow the stock tips blindly.
- 100% in one single investment
It’s not a smart move to invest the total investment capital in one specific market or commodity. Pundits always advise not to put all your eggs in one basket and a manageable diversification would be great for you. If you can distribute your capital in different markets, you will have the backup when one market crashes down. You might want to start with one market, but as you start to learn the ropes of the trade over time, try to venture into other markets as well.
- Buying with pending debt
This is one of the grave mistakes to take care of here. Investing while you are still high in debt is a very, very bad move. You must try to get rid of debt first, as otherwise it would be like trying to recover your drowning vessel with a mere coffee mug.