Conventional wisdom tells us that the majority of those who play the stock market struggle at one point or another. In many cases, they either stumble financially before they find their footing or simply see no ROI for their time spent researching and putting in hours upon hours of work.
But considering the current health of the stock market, though, what’s with all the gloom and doom? Why do people struggle so much when there are so many resources out there.
The fact remains that many newbies fall prey to a series of mistakes that ultimately keep them from ever actually getting started. Whether you’re just getting started with stocks yourself or want to avoid some of the most common pitfalls that new traders and investors face, keep the following five snafus in mind.
They Don’t Know Their Options
First of all, trading and investing are not one-size-fits-all affairs. Between understanding the different call and put option strategies to investing in stocks versus mutual funds, not all investors are created equal in terms of what types of investments are right for them. Some serious considerations for the long-term success of your investment journey include…
- How much time you can realistically spend day-to-day on your investments
- How much cash you have on hand to invest (think: spending only discretionary income)
- Home much homework you’re willing to do before you spend a time (think: reading industry blogs, books and looking at the advice of proven traders)
In short, do your homework and understand exactly what you’re getting into rather than getting in over your head.
They’re Not Patient Enough
Simply put, you can’t throw money at your investment woes. While it may sound cliché, finding success as an investor is akin to a marathon rather than a sprint. In the immortal words of Warren Buffet: ““I don’t look to jump over seven-foot bars: I look around for one-foot bars that I can step over.”
In other words, those new to markets should look before they leap. If you aren’t in the game for the long haul (think: years), you might want to place your money elsewhere.
They Follow Names, Not Numbers
Just because you have a personal or professional stake in a potential investment (think: a budding tech startup or big company that you’ve been following forever) doesn’t mean that it’s a wise investment.
Sure, it’s tempting to want to be on the ground floor of “the next big thing” or feel like you’re part of something bigger, but what does it realistically mean for your portfolio? There’s a time and place to rely on your gut, but never make the mistake of ignoring your investments by the number.
They Assume That They’re Winners
There’s this romantic idea out there that the ideal investment is always around the corner. Combining each of the aforementioned tips, you should never make any sort of assumptions about your investments. For example, beginner’s luck is incredibly rare and shouldn’t be something that you expect when you start investing.
We’re not saying to go into the markets with a sense of gloom and doom, but rather make sure that you have your head on straight before you invest yourself into oblivion.
Hope these tips can help you understand where you might be going wrong as a new investor or trader. Either way, keep doing your homework and don’t give up at the first sniff of trouble.