The very early stages and/ or days are the most important phase of becoming a Stock Market investor. This is the time when most Newbies tend to make a number of mistakes.
Making some or all of these errors could be the difference between becoming a successful investor long-term, or losing your life savings altogether.
Today, we will be shedding some light on five errors early investors should look to avoid.
1) Failing to get the right stock market education
Most common among these errors is a failure to get the right Stock Market education. A true understanding of how the stock market works could take several years and does not happen by chance. You have to understand what’s going on in the economy, trends affecting a particular stock niche, or the market as a whole, world markets, etc.
There are millions of free resources available online for you to study. Make use of it. Understand how the stock market works before diving straight into it. You can also start by reading books. It’s very easy to get the education if you are willing to put in the time and effort.
2) Buying stocks based on impulse or 3rd party opinion
The second mistake made by most beginners is buying based on lose advise or opinions provided by another individual, website, or so-called stock market guru.
A good number of newbie investors unfortunately fall right into this category.
Nothing wrong in getting recommendations from your friends or family members, but, the most important diligence you could do is your very own “due diligence” Diversify instead. Check out other investment platforms.
3) Adopting too much stock market leverage
The third error or mistake newbies make is using too much leverage.
Using leverage can be of value, and in fact an advantage, but only if you know exactly what you are doing.
It is prudent for new investors to stay away from the leverage tactic when they are just starting out. Although very tempting to use as the potential gains could be very rewarding, it is worthy of note however that if thing go awry, potential losses could also be catastrophic.
Leverage, if used incorrectly could lead to huge debt and possibly, bankruptcy. You should only consider adopting the leverage strategy if you have a proper trading or investing strategy.
4) Treating the stock market as a gambling site
Next on the list is treating the stock market as a gambling site.
Quite a number of people treat the stock market as an extension of their favorite gambling casino.
It is not a place to gamble.
I think it is also worthy to note that gamblers always lose in the long run. Trading is an art-form, a marathon and not a sprint. The patient dog typically earns the fattest bone
5) Using high-commission brokerage houses
Last but not least on our discussing list today is the mistake of choosing high-commission brokerages to start.
Take for instance you decide to invest $50 weekly but are paying $5 in commissions. This computes to your being down 10% from the get go, and, on a weekly basis. Ouch!
Do a little bit of research before diving in to find a cost effective brokerage.
There are several free platforms available today, including Robinhood and Stash
However, whatever the strategy, please ensure your broker of choice is regulated and has a clean record with the regulatory bodies.
So, what to do?
Is this a good time to think about dipping those investment toes into the stock market?
Surprisingly, I think absolutely yes.
Sadly, with the economy currently being a shell of what it was 6 months ago, tons of Americans are losing their jobs or being told to take pay-cuts, and the unemployment lines are growing at an alarming rate.
But, if you had the extra cash to invest, there perhaps isn’t a better time to take a look at the stock market than right now.
The so-called experts hardly ever seem to agree on anything, but when it comes to the stock market, most do believe our economy will be back over the next 5 years or thereabout, give or take a few years.
If you are an investor capable of a long-term outlook, and have the cash to float the investment, history just might prove that there never was a better time to invest in a down stock market than right now while America, and the rest of the world alike, is reeling from the effect of the Covid-19 pandemic.