"Wall Street is the only place that people ride to work in a Rolls Royce to get advice from those who take the subway".
Those who understood the meaning of this great quote from the legend investor, would stop their investing activities immediately and start to acquire real knowledge and wisdom to become a successful investor.
Investment wisdom is not only acquiring necessary knowledge to make successful investment decisions, but also meant for learning and avoiding costly investment mistakes.
Buffett's quote pointing fingers to the foolish investors who are really ignorant on what they are doing.
Let me ask,
"Do you have any history of money loss from stock market investing?" or
"Did you studied about all the common investment mistakes investors commit regularly while investing?"
If your answer is 'YES' to the first and "NO' to the second, this article meant for you.
It is a well researched set of "20 common investment mistakes investors frequently commits" regardless the place where they are.
If you are suffering from investment loses in the past, here you will know the reason behind that and how to resolve that!
Here is the complete list of deadly investment mistakes:
Trap #1. Start investing without self assessment on readiness
and goals
Trap #2. Thinking and approaching stock
market with full of greed to become super rich overnight.
Trap #3. Considering stock investment as a
part time job or hobby or a place to test luck
Trap #4. Starts without acquiring proper
knowledge on investing, stock market, risk and returns
Trap # 5. Taking investment decisions with
lack of knowledge on where, when, how much to invest
Trap # 6. Investments on company stocks
without studying about their business, management, financial status
Trap #7. Investment on companies with high
debt, low or no Return on Equity, Negative Cash flow and operating in highly
competitive sectors
Trap #8. Follows the activities of public,
fellow traders, colleagues, big investors
§Trap #9. Makes any investments on market
rumors, analyst reports, hot tips, broker recommendations
Trap #10. Entering to the stock market as a
short term trader, intra-day trader, speculator
Trap #11. Investments without proper study,
research, references on the business economics, market time and risk-return
possibility
Trap #12. Not having necessary investor
qualities of patience, prudence and having disadvantages like being panic on
stock market volatility
Trap #13. Less diversification by putting
huge money to a or two businesses or over diversification by investing little
money to number of stocks
Trap #14. Investing on businesses that are
unknown and/or investing on franchise model businesses, commodity businesses who
have huge competitors, high debt and less or no returns
Trap #15. Panic selling of a good stock in
a down market or buying a bad stock in an up market, by greed
Trap #16. Large investments on penny stocks
and micro cap stocks
Trap #17. Making investments with borrowed
money as loan from banks, financial institutions or from friends and relatives
Trap #18. Making investments relying on
stock screener, charts, technical analysis data, candle sticks which doesn't
able to expose the real fundamentals of a company than its past trading
information and volatility
Trap #19. Not having proper knowledge on
when to sell a good stock and when to throw a bad stock
Trap #20. Finally, forgetting the truth of
‘start investments early’, but makes investments largely just before the
retirement.
How to Avoid Costly Investment Mistakes
The investment world is a landscape of opportunity, but also potential pitfalls. Avoiding costly mistakes can mean the difference between achieving your financial goals and facing setbacks. Here are key strategies to navigate the investment journey with confidence:
Don't Chase the Hot Tip:
Resist the allure of "get-rich-quick" schemes or following fleeting market trends. Focus on building a long-term, well-researched investment strategy aligned with your goals.
Beware of Emotional Investing:
Market fluctuations are inevitable. Don't panic-sell during downturns or impulsively buy based on emotions like fear or excitement. Stay disciplined and stick to your investment plan.
Diversification is Key:
Don't put all your eggs in one basket. Spread your investments across different asset classes like stocks, bonds, and real estate to mitigate risk. A diversified portfolio is more resilient to market swings.
Understand Your Risk Tolerance:
How comfortable are you with potential losses? Be honest with yourself about your risk tolerance and choose investments that align with it. Aggressive investors might handle higher risk for potentially higher returns, while conservative investors prioritize stability.
Beware of Hidden Fees:
Investment fees can eat into your returns over time. Research expense ratios and hidden charges associated with mutual funds or ETFs before investing. Consider low-cost index funds for a cost-effective approach.
Don't Neglect Asset Allocation:
Maintain a healthy balance between different asset classes within your portfolio. Rebalance periodically to ensure your asset allocation remains aligned with your risk tolerance and investment goals as market conditions change.
Invest for the Long Term:
Building wealth takes time and discipline. Don't expect overnight success. Focus on a long-term strategy and avoid frequent trading, which can incur unnecessary fees and potentially lead to impulsive decisions.
Do Your Research:
Before investing in any company, conduct thorough research. Analyze its financial statements, understand its business model, and its competitive landscape. Don't blindly follow recommendations without doing your due diligence.
Beware of Investment Gurus:
There's no magic formula for market success. Be wary of individuals or services promising unrealistic returns or guaranteed profits. Invest based on your research and understanding, not on empty promises.
Seek Professional Guidance (When Needed):
As your portfolio grows or your financial situation becomes more complex, consider consulting a qualified financial advisor. A professional can offer personalized advice and guidance tailored to your specific needs and goals.
Conclusion
By following these strategies, you can make informed investment decisions and navigate the market with a greater sense of confidence. Remember, investing is a journey, and continuous learning is crucial. Stay informed, stay disciplined, and avoid these costly mistakes to pave the path towards achieving your financial aspirations.
