Now that you’ve decided to invest in stocks after going through the weighing of all the pros and cons, there are some things to avoid when you start investing in stocks.
As you well know by now, investing in the stock market is a high risk-investment. It is sometimes considered as a form of speculative investment because of the possibility that you might lose part or the whole of your investment because of false move and poor decision making – not to mention your lack of research tools and realistic market analysis.
Here are some of the things to avoid when you start investing in stocks:
1. Not Knowing Thyself: Know Your Investing Plans and Goals
Why do you need to invest your hard earned money in the first place? Are you after peace of mind, financial security and a comfortable retirement? Or you simply want toinvest and see how your money will grow?
You must know that there are two types of investment in terms of risk: low risk and high risk investment. Investing in the stock market is a high risk investment. You must also consider the time element whether you want to invest in stocks for a short or long term period.
If you are really inclined to start investing in stock you must see the big pictures. Needless to say, one cannot afford to have a myopic view of the matters.
2. Lack of Knowledge about Stocks and the Stock Market
Knowledge is power and information is also power in the Cyber Age. Always remember that investing in stock as a form of investment is not for everyone.As a matter of fact out of 100% investors only 4% becomes successful in their stock investment. From these basic facts, you will have a rough idea that investing in stocks is not that easy as it seems to be.
The stock market is a combination of theory and practice – both always go hand in hand. Reading all the books on stocks and investment is good but without putting into all your book learning into practice will be futile in the real world.
3. Borrowing Money to Invest In Stock
This is a sure way to financial ruin and disaster. Can you imagine paying a loan with interest when you are not yet earning from your stock investment? You have two conflicting variables here: duty to pay your debt on the one hand and the expectation to earn a profit from your stock investment on the other hand.
Whether you earn or not, for sure you’re obligated to pay your loan.
Common sense dictates that the source of any of your investment must come from your savings for that matter. Some people don’t realize that investing in stock with borrowed money is just like starting a business with the wrong foot.
Stock market high risks that it is must not be coupled with the concern of re- paying your loan.
4. Scarcity of Your Resources
Assuming that you have enough money to invest in stocks — another thing to consider is how much are you willing to invest in stocks? Can you afford to lose your investment in stocks in view of the high risk factor and the speculative nature of stocks and the stock market?
Although stock investment has a speculative element it is not gambling. It is not at all about winning or losing all the times.
There is no such thing as an unlimited supply of your money when it comes to investing your money in stock. You need to set the financial limits of your investment in stocks. Indeed you cannot afford to place all your savings in stocks for this will be unwise and unsound in case of sudden misfortune in the stock market.
4. Not Tempering Human Greed
Who does not want a get-rich-quick-scheme? Some people want to have a quick and high return or yield for their stock investment in the shortest possible time.
However, this is not the way how things work in the stock market world. Good things come to those who wait. Some things don’t change in stocks and in the stock market – it is only the player that changes. The proven rules in stock trading will always be true: Buy when the value of stocks is low and sell when the value of stocks is high.
5. End Game
Some newbies in the stock trading have no acumen and foresight yet as to the end game of stock trading. What’s your end game plan? Just like in chess, it is not sufficient to know your opening move when you start investing in stocks – much less, your middle and end game plan in stock trading.
After all it is always your end game stock investment plan that will matter at the end of the day. Be a wise investor and start investing in stocks wisely. Make your best move.