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Investing In Stocks: 5 Rookie Mistakes To Avoid At ALL COSTS

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There’s something about capital markets that captivates everyone: Some think stocks are an easy way to make a quick score. Others, on other hand, liken stock to gambling.

And then there are some who just don’t have a clue about stocks at all.

(Fret not, #WealthGANG, we’re here to serve!)

But why is the stock market so fascinating? What causes people to be completely overawed by it?

Despite the many myths, it is extremely easy to trade in the markets; you can actually get started on your smartphone for less than $10.

But to trade stocks successfully? Now that’s another story—despite what those in-their-20s Instagram crypto money managers and scammers want to tell you.

For all the myths, biases, (mis)beliefs and misconceptions, you can still hedge your bets by following a disciplined blueprint. In this case here, we will share with you what not to do.

Here are X common investor mistakes to avoid at all times.

Mistake #1: Thinking you can make a quick buck from Wall Street

This is probably the single biggest misconception about the stock market. Investor legends like Warren Buffett always maintain you need to invest over a long-term horizon to book big profits.

And even if you have stories like the ‘Teenage Bitcoin Millionaire,’ trust us on this one! They’re the exception, not the rule.

Mistake #2: Investing on impulse

Many investors jump into trading based on hype—kinda like Bitcoin, which surged to record highs in December before losing billions of dollars since, sometimes in 24-hour periods.

In other words, decision to enter the stock market’s based on an impulse. There’s no proper entry strategy and no exit strategy.

This is not how an investment decision should be made. Every investor should realize that investing in the stock market is a long-term play—it’s definitely NOT a get-rich-quick scheme.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

-Paul Samuelson

Mistake #3: Following the hot tip! 

Investors are all on the lookout for hot leads and stock market tips. But in reality, there aren’t any. This mistake is exactly how the “Wolf of Wall Street”got people onboard with his schemes.

Even if someone does have a hot tip, you have to watch out for human nature: People may skew positively towards stocks they own—and negatively towards the ones they don’t.

The reality is this: There are qualified analysts who spend all day researching market trends and metrics.

Investment managers and brokers then share these analyses with premium clients. Much more credible info, yes. However even after receiving this analysis, there is no guarantee the investor will see an ROI.

Warren Buffett is a firm believer that investors can grow wealth by just replicating the indices instead of looking for multi-baggers and stocks that are expected to crush the market.

“If stock market experts were so expert, they would be buying stock, not selling advice.”
Norman Ralph Augustine

Mistake #4: “Buy/Sell Strategy”

This is probably the biggest misconception of all. Many investors, impulsively, end up buying a stock just because they see the price surging. (Again, think Bitcoin in December.)

As the price continue to climb, they’ll sell the stock and make a huge profit. The so-called Buy-Hold-Sell Strategy

But that is not how the stock market works. (Buffett’s mantra is buy-hold-and don’t watch too closely.)

If you do buy a stock, hold it for some time and then sell…you don’t have any guarantees the stock will rise.

A better play—aside from Buffett’s, obviously—is the borderline cliched “Buy Low/Sell High” strategy. In this strategy, an investor buys a stock on the downslide instead of when the price is rising.

All the investor has to do is hold the stock until a price correction occurs. If the stock is fundamentally strong, the price will increase. This will be the time to sell it off and earn a profit.

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” — Warren Buffett 

Mistake #5: No clear investment objective

Every investor should define, clearly, what his or her investment goals are.

The rule of thumb of investing is the higher the risk, the higher the return. So if the market return is less, then—needless to say—the risk involved is deemed less.

There are two forms of securities, generally: Stocks (equity) and bonds (debt).

Stocks

Equity stocks tend to have higher risks associated with them. However, there is a tremendous potential to earn capital gains from equity shares—but with the caveat that you should be prepared to lose your investment

Bonds

Bonds and fixed income instruments are relatively less risky than equity shares. They offer periodic returns in the form of interest but are still prone to market risk.

A short-term investor looking for minimal risk is better off buying treasury bills and government securities.

Whether it’s cashing out on tech stocks with high upside or just collecting tax-free yield from municipal bonds, your investments should be in line with your objective.

“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch

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INFOGRAPHIC: How To Invest Your Money (In 8 Simple Steps)

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Plenty of savers are making do with low rates of return on their deposits—almost eroding the value of their savings. Here’s a guide on how you should invest your money and gain some great returns off it.

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Stock Trading: How to Choose the Best Online Brokers

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Stock trading can be a risky business but done right it is an extremely lucrative investment option which yields excellent returns. It is true that trading is quite intimidating for someone who is new to the market and its ways which gives rise to the need for a good stock broker who can handle the job and ensure that the client gets the best returns possible for the money he or she is investing. But as a new investor it is absolutely important that you choose a very good trading broker. Here are some tips that will help you make that choice better.

Understand your trading needs

Before you even look into the services of a trading broker, it is essential that you are aware of your goals and needs from your stock trading. Firstly, prioritise your investment value, short term and long-term goal, and time that you are willing to spend on your trading in order to figure out where you stand. Now, narrow down on the specific kinds of stock exchange that you are looking into. With the wide variety of options available that you can choose from, it is important to narrow down to the specific field or fields and finally look for brokers who suit your specific needs.

Have a clear talk about trading fees

It is important to have a clear-cut discussion on brokerage fee and commissions that your broker will charge you. Ask about the charges per transaction, basic account charges, account minimums and even reimbursements if and when you choose to part ways so that you can have a proper idea about how much you are about to fork out for your trading. It is a good idea to have the talk beforehand so that you do not get into an arrangement which later becomes financially burdensome for you.

Look up reviews on the broker

You would not buy a new product without checking what its previous users have to say, right? Similarly, look up your prospective brokers No matter how promising or lucrative a broker seems with the terms, make sure you check the reviews by InvestinGoal to ensure that you are actually getting a good deal and not being sweet talked into not a good broker or even worse, being conned of your money.

Ask your questions

Do not be afraid to ask whatever questions that come to your mind before you make a deal. This will help you understand your trading better and thus, to get the absolute best out of your investment. It will also help you uncover any hidden charges, non transparent clauses as well that might have later hindered the desirable growth of your stock.

Give a test run

Ask the broker if you can give a test run of your account, and his technology before you actually invest your hard earned money. Many brokers allow you to create a free account which you can use to test their platform and check out user friendliness, ease of trading, quality of tools etc and thus, make an educated decision.

Getting the right broker is definitely one step towards a good stock trading investment. Therefore, it is very important that you take utmost care in picking the very best broker for your trading needs.

This article originally appeared on ValueWalk. Follow ValueWalk on Twitter, Instagram and Facebook.

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3 Simple Steps To Build Your Investment Portfolio

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If you’re starting out with planning your investments, chalking out your goals and how you’d like to achieve them is incredibly important. You’ll need to understand what kind of assets you’d like to invest in–be it exotic instruments like private equity or the tried and tested ones like the treasury bonds, ETFs and stocks–and invest right. Here are three key strategies to build your portfolio:

1. Building Wealth Is All About Thinking Rationally (And Smart)

Having the right mindset can play a huge role in how you build your investments. It’s simply not just about strategy. To ditch following the latest fad in the market, you need to be responsible and have a sense of social indifference–coupled with confidence and patience.

2. Invest Like A Cheapskate

If you’re pumping in $150,000 as investment, on which you incur 1% as fees, look out for ways through which you can cut them down.

If you were to cut costs by a little more than a half, that’s saving you at least $1,120 in fees every year. But that’s not it–when this saving is compounded every year, that 1% fee can tally up to a million (if saved, could win you your big ticket to becoming a millionaire!)

3. The KISS (Keep It Simple, Silly) Rule

Funnily enough, most of us think investing your way through millions demands extensive knowledge of financial instruments or strategies. Surprisingly, it’s the simplest of assets that gave the biggest investors their biggest wins. Many successful investors highlight their success to stocks, bonds and other popular alternative investments, patiently held over time.

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