Investing in your future can be exciting. Often times the excitement leads to many mistakes by the amateur investor. When time has been set aside for research common investing mistakes can be avoided.
Most amateur investors have a tendency to buy stocks because they are a hot commodity. Professional investors know when a stock becomes hot it is too late invest or you will receive little return. Following trends is risky for your investment portfolio. Amateur investors risk loosing a lot of money and potentially becoming turned off to investing. Following your friend on a stock without doing your own research is another way to make a bad investment and potentially ruin a friendship.
Lack of research
Often times amateur investors have a tendency to invest in a company based on popularity as opposed to actually understanding the company. When there is a lack of research you have a tendency to go on a whim which is very risky and should not be a habit. When researching a company you will develop better anticipation skills therefore resulting in better investing. Researching a company based you understanding the company allows for you determine whether the company thrives in a booming, poor or both types of economic situations.
Cost per share
Amateur investors have a tendency to invest in a company based on the cost per share as opposed to invest based on percentage. For example, let’s say Helium was a public company and had shares costing $3.00 a share whereas an energy company costs $.50 a share. As long as there is a high volume of shares available with the energy company, the energy company is a better buy because it is easier to make gains. Let’s say both companies stock price rise $1- Helium shares earned you 33% return and the energy company earned 200% return.
Amateur investors who invest in safe stock can not expect to strike gold. Usually, safe stock are companies whom are in the maturity stage. Safe stock is good for balancing out your portfolio over the long term. Amateur investors have a tendency to feed the meter or keep investing hoping the company will make a drastic change. When the change does not occur the amateur will drop the stock due to impatience. Professional investors know the importance of balance within your investing portfolio.
There are many mistakes to avoid when investing. The above chosen list are among the mistakes I feel are most critical. Good things come to those who wait. Good luck!