There are several investing mistakes you can make along the way, however there is 1 big mistake you must avoid at all costs if you want to become a successful investor. For example, the biggest investment mistake you could make is not investing at all or putting off investing until later. Make your money work for you – even if all you can save is $10 a week to invest!
Patience is the key because it pays to be patient and monitor the price of stocks for a period of time before buying them. Investing is quite long-term, and contrary to popular belief about quick profits, you should look at price trends. It pays to be patient so that you can buy when the price goes down and sell when the price strengthens. There are some investors who don’t really take the time to do their own research but blindly follow their broker’s advice. It’s not a bad idea to buy and sell stocks based only on price targets suggested by analysts. Read the reports, but decide for yourself!
Invest only the amount you can afford to lose. In other words, you don’t have to borrow on margin to invest. You need to determine how much money you can invest and how much you risk losing if your investment goes wrong. Investments take time to play out and selling stocks to pay bills is the worst reason! Another mistake an investor can make is to sell or buy frequently, perhaps due to lack of planning or too much enthusiasm. This is not recommended as transaction costs will add up and eventually eat into your return on your investment.
Failure to learn about a firm before investing in it is a very common mistake. Some investors buy a company’s stock without knowing enough about its core products or prospects. A common feature of most speculators is the lack of an investment plan. Such an investment plan should outline specific goals and the time frame in which you hope to achieve them. For example, if a stock falls sharply, you should have an idea of whether you want to hold on or get out and cut your losses. In addition, you can decide in advance what type of companies you want to own stocks in long-term growth companies or blue chips.
Finally, investors tend to listen to hot tips or hearsay. This is not a systematic way of investing. Relying on bold assumptions means that you will be investing with your head, which will lead to “hasty” decisions. Investments should be based on fundamentals that you should verify during your research. These include understanding the business model and cash flow of the company.