For most of us, learning something new probably means making some mistakes along the way. We learn from experience – and the more we try, the better we get. For this reason, many people agree that it is best to work hard and obtain our valuable learning experiences as early as possible. Then, with the simple mistakes under our belts, we can move forward and make more calculated decisions in the future.
In this sense, investing is just like anything else – it’s very likely that you’ll make mistakes when you first start out. But, don’t let that thought scare you, because it’s also probable that you will get better at making investing decisions as you obtain more experience. With this idea in mind, we asked: what are the top mistakes that young investors make? We also asked: how can those mistakes be avoided by new investors? Aside from the obvious mistake of not investing at all – which can definitely be a big mistake! – we have created a list of the top three biggest investing mistakes among new investors:
So, how do you avoid speculation? This one is pretty simple and cannot be emphasized enough: do your research. Read up about the company you invest in, how it makes profits and even the opinions that others may have about the company’s future. Anything and everything that you can read about a stock before you put your money into it will help you avoid speculation and, in turn, help you discover your true risk preferences for the long run.
You can avoid making this mistake by learning to trust yourself and your research – and trying not to hesitate when you think you have found a good investment decision. The quicker you act, the better your outcomes could be!
3. Not Asking Enough Questions
So, how can you avoid getting caught in the trap of mistaking a genuine problem for typical volatility? Monitor your portfolio from time to time and take note of any changes that seem abnormal to you. Remember, your research on a stock should not end right when you purchase your shares – it can continue throughout the lifespan of your investment to protect you from making mistakes like this. If something looks fishy, just ask questions!
Of course, your start to investing could be a series of ups and downs. But by keeping these extremely common mistakes in mind and by actively trying to avoid making them, you could stay on top of your new investments and be well on your way to better, more confident investment decisions in no time!