It’s not uncommon for any investor, whether experienced or inexperienced to make mistakes every now and then. When starting out in the business of investing you’ll learn a lot from yourself and those around you. Here are some of the top missteps investors make.
Delaying Action: Procrastination is one of your top enemies when investing. The stock market has steadily risen over the past few years, even when we take into consideration some of its downturns. For this reason, you shouldn’t wait; invest early and often because you’ll be better off in the future.
Timing the Market: Timing the market is impossible, and it’s one big mistake that traders tend to make. When you try to time the market, portfolios end up underperforming market averages.
Failing to Sell: Neglecting to sell stock when isn’t performing is another common mistake that many investors make. According to The Street, “This phenomenon occurs frequently because people tend to despise accepting losses and others are convinced they made the right decision, even after the stock has suffered a 20% dip.” When your stock isn’t doing well it’s important to evaluate the situation critically and weigh the pros and cons of selling.
Eggs in One Basket: Investing specifically in one area can hurt you in the long run. Investors tend to do this because they’re hoping for a jump in the stock to maximize return. A lack of a diverse portfolio can do more harm than good.
Not Asking Questions: It’s important for investors to ask “why?” when making decisions on investment. At the end of the day there’s a reason “an asset is trading at half of an investor’s perceived value,” according to Investopedia. Investors who fail to research all of the necessary information will often fail to succeed.
It’s vital to remember that we all make mistakes, but, we can learn from them. Both the experienced and inexperienced misstep every now and then. Always diversify your portfolio, take action, and ask questions when investing. By doing this, you’ll avoid some of the most common mistakes investors tend to make.