Beginner Investor Mistakes on the Stock Market – What to Avoid

The questions I receive by email are a real inspiration for the articles and thank you for doing so. I like to write when there is a problem that I can solve or analyze.

Many questions are related to stock market investments. These questions arise more due to lack of experience, too little time for learning and insufficient patience.

Many times, we end up investing in certain things that we do not understand or have the patience to understand. We want everything to be now, quickly and without much to do.

I think technology also has a negative role for this. It made us more dynamic, but at the same time, more impatient and more agitated. We want things to happen now, without analyzing and not knowing if it’s good or not.

There is a category of people who make very good money in USA or Europe and have learned that they have to invest their money. Maybe they even have some investments in real estate and now they want to enter the capital market.

When it comes to the capital market, here you need a large enough education to get started or, for a start, start investing with the help of investment funds.

But, most of the time, we end up investing in certain companies on the stock market because it is heard that it is good (news, articles, friends). Not everything that is heard in the market is relevant and that is why we must be careful.

Next, I made a number of mistakes most beginners make when it comes to stock market investments.

If you are a beginner, read on and try to avoid them:

1.Buying without first doing an analysis

No matter what actions you want to buy: shares in well-performing companies or Amazon, Facebook on the outside – you have to do your research.
You have to do your analysis no matter how convinced you are that it will work or not. You need to know all the details about the actions you will buy.

Fundamental analysis is very important to know what are the performance indicators of the company.

Technical analysis is also important in order to have a vision of what happened in the past and in what direction the graphs go.

The analysis of public opinion about the respective action is also important (news). Read everything you find about the company and see what their future plans are.

There are so many tools to help you, you have to have time to do all these analyzes . But if you do not give yourself time for investments it means you do it “by ear” and “so I heard”.

The shares present a certain degree of risk and you must consider these analyses before investing in them.

2.Buy at the advice of other people and do not consider your own opinion

A lot of people just follow the herd ,especially in the beginning steps of the investment process.

As was the bitcoin trend of 2 years ago when it grew very much based on positive information and news from the market. At that time, everyone wanted to invest in bitcoin. Many borrowed from the bank and invested. And after that decline, only those who researched all this mechanism remained standing.

All the questions at the time were: I want to buy Bitcoin – How do I do this?

And after that decline, only those who researched all this mechanism remained standing.

This is what happens in actions – we see positive news about a company, we also invest and we do not think about personal analysis.

We have to learn from the best. Warren Buffett said: “Invest in what you know … and nothing else.” Choose a sector to learn from or choose a few companies to analyze and invest properly.

If you cannot analyze and invest in several companies, analyze an index and invest in it.

And for advice and opinions, it analyzes all the important news and information you find, but the most important thing you need to do is pass all the information through your own filter.

3. Buy and sell very often

Most beginners consider the stock market as a place where they must act daily. They think they have to buy now and sell fast.

Short-term investments are speculation based on true or untrue news.

It is important to know that stock market investments are long term. When buying a stock, you need to think about whether you want to hold it for at least 3-5 years.

Without a good analysis (point 1), you get to buy and sell quickly because you are not ready and do not know what to expect.

4.Invest in the short term

Many want to invest on the stock exchange for 2-3 months or 1 year.

Everything that means 2-3 years is very little. Yes, there are times when you sell an action because you make another investment strategy, but most of the time, the investment is made in the long term – 5-10 years.

You sell at times when the company no longer has a favourable growth, but you don’t sell immediately after it drops 2-3% based on probably some rumours in the policy.

If the market falls on the basis of rumours, then you can buy more (see December 2018 when it was determined that it was a good time to buy).

A true investor buys, analyzes and holds for the long term.

Stock market investments are not for 2-3 months. If you want a place where you can only deposit your money for a short period of time, you should look to other options.

5.Sell immediately after the market declines / increases slightly

Beginners are panicked. When a stock drops by 2-4-7-10%, it immediately sells.

We also had shares with -20% and afterwards they recovered.

The problem arises because: It is not a well done analysis + we are influenced by everything that moves around us.

Wait, research and sell only if you have done your calculations well.

If you panic, the investment may not be for you.

Stock market investments in classic stocks do not mean trading. If you want to buy and sell often, maybe the Forex market will help you.

The problem also arises at times when the market is growing. If you see a yield of + 5% or + 8%, you immediately sell. Not good.

6.Wait for the right time

Yes – and we will grow old.

We will never catch the right moment.

There is no right time because we will never know when this is coming.

It is much better if we invest constantly, monthly, an amount of money, than to wait for the right time.

The crisis has been coming for several years and we are still waiting for the market to decline.

It’s good to have cash to buy if the crisis comes, but that doesn’t mean we can’t invest until then. I have a part of cash that is oriented towards opportunities, but it does not mean that the other part of 90% of the portfolio is not invested.

7.Invest in only 2-3 companies

A big problem would be the diversification part. You cannot invest on a stock exchange only in one company – two, because that’s how I found out.

Diversify as much as possible, both the shares and assets.

Don’t just limit yourself to the actions of companies. Make yourself a complete portfolio that may include: bonds, gold, real estate, etc.

The more you diversify, the more you are protected in times of crisis.

8.He invests the money he cannot afford to lose

It does not mean that on the stock market you will lose all your money. You can lose them on the forex, but on the stock exchange you buy a title / an action / value of a company.

You don’t lose everyone. But you can’t even call them at all times. Maybe you will have a time when the market is on the decline and you need to sell.

Then it is good not to sell, if you have the calculations made that it is just an unfavourable period.

Before you invest, make sure you have an emergency fund of at least 6 * monthly basic expenses to ensure your life no matter what happens.

This will help you give up the idea of quickly selling and withdrawing your invested money.

In conclusion:

These are the most important mistakes that I have seen are made repeatedly.

Even I have done many of them, including the first which is the most important in my opinion.

It analyzes very well before you invest.

Invest first in education and then on the stock exchange.

(Good) luck for money!

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