January 3 2018
Making mistakes is part of the learning process. Nearly 95% of investors, new or experienced, had fallen astray from common sense and made a mistake or two. Knowing these common investing mistakes can help you closer to avoiding losses while making gains.
1. Underestimating Your Abilities
Some investors tend to believe they can never excel at investing because stock market success is reserved for sophisticated investors. This perception has no truth at all. Investors can become well equipped to control their own portfolio and investing decisions - and be profitable. Remember, much of investing is sticking to common sense and rationality.
Besides having the potential to become sufficiently skillful, individual investors do not face the liquidity challenges and overhead costs large institutional investors do. Any small investor with a sound investment strategy has just as good a chance of beating the market, if not better than the so-called investment gurus.
Never underestimate your abilities or your own potential. That is, don't assume you are unable to successfully participate in the financial markets simply because you have a day job.
2. Using Money You Cannot Afford to Risk
You would be blown away if you could see how different your trading style becomes when you are using money which you cannot afford to risk. Your emotions get heightened, your stress level goes through the roof, and you make buy and sell decisions which you otherwise would have never made.
3. Too Little Due Diligence
To do the proper amount of due diligence, especially with highly speculative and volatile stock shares, it takes a significant amount of work. The more due diligence you perform, the better your investing results will become.
The vast majority of investors do not even come close to doing enough due diligence into the companies that they invest in. Most people just want to find a company that seems to make sense, and should increase in value because the underlying industry (at least in their mind) is "up-and-coming."
Luckily, you can use your losses and mistakes to learn how to avoid them next time. In fact, most people learn more from their losses than they do from their gains.
As an individual investor, the best thing you can do to pad your portfolio for the long term, is to implement a rational investment strategy you are comfortable with and willing to stick to.