If a newbie like yourself happens to stumble across the stock market and just because you seem to know a couple of terms from the finance dictionary does not make you an investing guru.
The stock market is a clever entity that is completely changing all the time and at times it will misbalance those who do not watch their step when they progress forward and make an investment.
Fortunately for you, we are here to name a few mistakes that newbies like yourself have a penchant to make in the stock market.
Let us discuss them here.
Going All Out With One Investment This is not a poker game.
In fact, in the grand scheme of things, losing one game ( or a hand ) in poker is like paying for a speeding ticket in the stock exchange.
You can lose a lot of money if you are not careful where you stuff your investment.
Always remember that investing 100 % of your earnings in a specific market, whether it is the stock market, high profile commodity futures, forex or even bonds is the worst possible move you can concoct.
Diversification is the way to be headed.
Diversification is when you start investing in all kinds of things that will be able to deliver a return to you.
With this move, yes you will risk losing a bit of capital but in the longer run it will reward you with what you desire.
Leveraging Up Using leverage might magnify the ability to give you gains but it can also become a double edged sword for your purpose by becoming a source of losses on an investment.
There are some forms of leverage available and one of them happens to be options.
Options have a limited downside or can be controlled by using specific market orders, as in forex.
No doubt, controlling the amount of capital will come at a great risk and will also require a great deal of practice.
Investing Cash Reserves Research has indicated that if you invest in the stock exchange with a bulky amount of capital, it will reward you with a better overall return.
However, if you are limited on cash then this approach is one that you should avoid at all costs because it can render you illiquid.
Investing; whether it is on an exchange, or any kind of business is always going to be a long - term plan.
Avoid looking at Even Stevens as your inspiration and turn to more favorable ones such was Warren Buffet.
Stashing all of your cash in a safe bunker will not reward you with any return, nor is going guns blazing on the market with every penny you have got.
If you only have limited amounts of cash, then investing might not make sense at the moment.
Come back when you have gathered sufficient amounts of capital then you will be ready to do some real trading.
Chasing News NEVER EVER run towards a company just because gossip spreads faster than a forest fire.
The connection between you and the stock market can only become positive when you have an understanding of it and trust us, you cannot have an understanding if you resort yourself to becoming victims of those gossip news that reaches people's ears much quicker than a pandemic disease.
Always be smart about this.