The beginning or starting is the most important phase of an investor. This is the time when they make a number of mistakes and some of them may cost your life savings. Today, we will be discussing about top five mistakes that an investor makes in his beginning stage.
1) Not getting the right education
The most common mistake is not getting the right education. Learning how stock market works can take several years. You have to understand what’s going on or else you’ll be burned down in the game. There are millions of free resources available online for you to study. Make use of it. Understand how the stock market works before diving straight into it. You can also start by reading books. It’s very easy to get the education yet a lot of people are not willing to do it.
2) Buying stocks based on others opinion
The second mistake that a beginner does is to buy stocks based on other’s opinion. Quite a number of investors falls into this trap. You may get recommendations from your friends or family members but don’t buy it until you do your own research. A right stock bought at a wrong time will get you in trouble.
3) Using too much leverage
Using leverage can be an advantage if you know how to use it wisely. It is advisable for beginners not to use leverage during their starting phase. It’s very tempting to use it as the gains can be amplified but also keep in mind that if things go south, losses will be amplified too. Leverage, if used incorrectly can get you into huge debts and you should only consider it if you have a proper trading or investing strategy.
4) The stock market is not a place to gamble
Quite a number of people enter the stock market to gamble. They think that it is a casino and it depends on pure luck if you will make any money. Stock market is not a place to gamble and gamblers always lose in the long run. Investing or trading is an art and it takes time to get the results. One who waits wins this game.
5) Choosing a brokerage with high commission
Finally, the last mistake that a beginner does is to choose brokers with high commission. If you invest $100 per month and pays $10 in commission, you are already down by 10% even before you start. So choose your brokers wisely. Also, keep in mind to go with reputed brokers that are well regulated by the monetary authorities.