Even the best investor will tell you that they have made mistakes. In fact, it is sometimes through making mistakes that you are able to improve your investment skills.
Of course, there are some mistakes that are better avoided. For instance, you can avoid the risk of making faulty stock value assessments by seeking the best advice online, ideally through an expert service offering clear and helpful share trading analysis each day. Here are the most common and most easily avoided mistakes made by novice investors.
Lack of a plan
This is the number one error that many investors make. A desire to make money and a vague idea about buying low and selling high will not be enough and can lead you into the wilderness, chasing every fleeting investment opportunity.
The solution is to have a plan and stick to it. Set out a personal investment plan before you begin, and make sure that it includes these key elements:
- Goals and objectives of your investing
- The extent of risk that you are prepared to take
- Benchmarks for measuring your success
- The areas in which you plan to invest
- Specific investment strategies
Too many investors focus on the short term, but investing is a long-term proposition. In this context, it doesn’t matter what the stock market does this week or next month. Don’t be in a hurry to chase quick profits as this often leads to reckless loss-making.
Listening to financial media
It can be tempting to watch the various financial news shows that are available online and through cable, but remember that financial news is as much about entertainment as it is about information. Besides, by the time a piece of important information has made it to the news studio, it will have lost all of its value. If you value the advice of television pundits, then you will be following the crowd and you will lose out. Do your own research and stick to your plan.
This is another form of short-term thinking. Too many investors choose their investments on the basis of strong performances in the short term, often on the basis that they will be missing out if they don’t. This is a recipe for disaster. Knowing that a certain stock or fund has done well for two or three years tells us only one thing: that we should have invested in it two to three years ago. As a guide to future investment, it is meaningless. Rather than chasing the shadows of strong trends that may be nearing their end, stick to your plan.
Making mistakes is sometimes unavoidable, but this doesn’t mean that we can’t learn from others’ experiences. By avoiding short-term thinking, not chasing performance, ignoring the financial media, and making sure that you have a strong and detailed plan, you will give yourself a better chance of securing a long-term profit on your investments.