Mumbai: Novice investors are prone to making mistakes. It’s nothing to be ashamed of – being a novice simply includes making bad choices. But the crime is in not informing yourself anyways – and making these bad choices again. Ultimately, you pay the biggest price by not avoiding these mistakes like the plague – after all, the consequences of a bad investment are quite harsh.
In the world of investing, there are a couple misconceptions that seem almost eternal. Let’s tackle them, and take a look at why they’re mistakes that need to be addressed early on for a successful investing career.
1. Rushing Into Investing Without a Plan or Budget
This is a fairly big mistake, but it’s an easy one to rectify. Investment decisions are made cautiously, with planning – that requires knowing your numbers, knowing how much you can afford to lose (and thus invest), and knowing how much you stand to make, or would like to make within a certain amount of time. Having a realistic goal can help you keep your eye on the ball, and not lose track of your finances – a big no-no. Don’t get reckless, and you’ll have this part down just fine.
2. Trying to Time the Market Efficiently
Some people try to make investments based on what the market’s lows or ups are, buying in when a stock reaches a low, and selling when it reaches a high. Unless you’re a trader by profession, you shouldn’t be doing that. Stocks are meant to be invested in long-term – most people don’t have the info, skill, or experience and trading chops to take on active investing to such a degree, so it’s much smarter to simply let an investment sit for months instead of checking on it daily.
3. Trading Rapidly/Trying Not to Ride out Lows
Another tied-in mistake is trying to jump the wagon when the going gets tough. Stock values fluctuate – that’s the nature of the game. Panicking and making a bad investment decision by jumping the gun on the sell button is a common mistake novice investors make, because they’re afraid of a crash. Unless you invested in a very volatile market – like, say, social media start-ups, or worse, the Bitcoin market – it’s best to simply ride out the lows and wait for the highs to come around again – because they will.
Bitcoin’s deviation in returns has been historically volatile, as btcvol.info catalogues, and with India being the world’s third largest base for tech start-ups in 2014, and considering the huge numbers invested by venture capitalists and angel investors as outlined in NASSCOM’s report, it’s a bubble waiting to burst.
4. Relying on Unreliable Financial Information or Opinion
Although an investor doesn’t have much experience to call back upon to begin with, it’s a bad idea to rely on the advisement of financial opinion websites when it comes to making direct investment choices. It’s definitely a good idea to read up on literature written by successful investors, but avoid relying on the word of others on whether or not you should invest in a certain stock, and instead simply go with the data and your own method of analysis, using guides to help you figure out how to get a good read on a stock or commodity market.
In the end, investment may seem like a dangerous game – but to the average unprofessional investor, it shouldn’t be. Just follow the cardinal rule – don’t gamble.
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