Investing Mistakes

It can be easy to make investing mistakes. Being a bit imprudent can cost you some money. These mistakes are caused mostly because of being less informed, or in some cases, trying to act smarter than the market and losing a lot of money as a consequence. We all can make these mistakes, but it’s important to remember how to avoid them.

Firstly, accept that we all make mistakes. One major mistake that many people make is using the wrong order type. The two orders to choose from when buying or selling a stock are: market order, and limit order. Market order is like going into a store and buying an item that you need urgently, where price doesn’t matter to you. Your order gets to the stock market immediately and is carried out. With limit orders, it is like going into a store and buying an item at a specific price. With market orders, there is no assurance on the price. When you use the limit order, you might not be guaranteed on buying or selling the stock, but you do get it at the price you want. It is easy to make a mistake at this time, however. Many people try to buy stocks and pay more for it just because they chose a market order and didn’t watch the stock through the day.

Another mistake is many people hardly log into their brokerage account, or either they log into their account too many times in the day. If you never check your portfolio, you don’t leave yourself with enough time to plan. You should aim to log into your account around once a quarter, to see how your stocks are doing, and make any essential changes. If you check your account too many times, it can cause you to make decisions based on emotions. Try to find a good balance between the two.

Many people consult with financial advisors and while that can be very helpful, don’t view it as a way to remove your own accountability. It is your job to check your investments regularly so you always know how they’re doing. If you aren’t happy with their performance you can talk to your financial advisor. Their job is to make sure you are happy with your investments and know how they’re doing.

Don’t base all your decisions on what the ‘experts’ say. Some of them may be very well-informed, but you should make very educated decisions based on individual research as well.

The stock market will always be changing which is why you cannot be emotional about your decisions. Have a clear plan that you can follow during market decline. For example: you can set a stop loss order and sell a stock if it loses 25% regardless of anything else. This way you don’t keep hopeful the stock will do better. It can even be said that a stock will rarely come up enough for you to recapitulate your loss of principal. Don’t knock your portfolio.

On the other side, don’t be too hungry with a certain investment. If a stock has done well enough that you are happy with it, don’t wait for it to slip more. Don’t risk losing half of what you have gained just because you were greedy.

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