Investing in the stock market is rife with its own unique challenges and pitfalls. For good (or even great) investors, it’s not often a matter of always making the perfect decision, but rather one of avoiding serious “mistakes”. Think of it like a strangely mathematical, partially chance-driven game of chess if you will – where there are multiple interlocking factors which pertain to your own moves as well as those of your competitors. The point is that one should always avoid slip-ups whenever possible, some being more relevant than others. The purpose of this piece is to familiarize the novice investor with some of the more common mistakes to avoid when buying shares.
First off, you shouldn’t fall victim to exorbitant fees. In the same way that you wouldn’t pay an employer in order to find gainful employment, it’s probably a really bad idea to shell out sums of money to management firms. It’s not to say that these institutions can’t (or won’t) help you, only that spending money you’ve set aside for use in stocks in non-allocated places like this could be seen as somewhat “counter-intuitive”.
Secondly, a lot of people jump into the stock market with tons of vigor and drive, eager for gratification and tend to jump in over their heads, so to speak. The fact of the matter is that unless you’re some sort of wunderkind, you’re probably not going to be able to pull off an incredible number of highly profitable short trades. For the average investor, the best (and perhaps most time-honored) way of purchasing stocks is to simply find a company that you truly understand and have a great deal of interest in and stick with them. Sure, it might not be the most glamorous, intense or invigorating trading method, but it’s one of the most prudent for those who are still learning. Moreover, there are tons of pundits out there who are constantly providing investors with their best long-term solid picks, so try to take their advice into consideration when forming your own opinion(s).
Last, but certainly not least, there’s the issue of speculation. Quite obviously, the more successful a trader is, the more removed they tend to be from conjecture. Specifically, one needs a 5 year (or longer) window to both aggregate investment capital as well as accumulate hard data (like charts) which will allow for much more refined (and accurate) decision-making. Simply put, you want to put your money into businesses that have a solid model and structure as well as desirable products and/or services. Of course this might also require you to have to go straight to the source for information, or perhaps find alternate channels. It’s important to remember that there’s an incredible level of daily hype present in most mainstream financial media streams, most of the data and analyses often being contradictory. In truth, you’ll eventually have to learn to develop and trust your own investing instincts, especially if you want to turn some major profits.