TOP 5 MISTAKES BEGINNERS IN THE STOCK MARKET MAKE

Greed

Beginners investing on the stock market tend to be greedy. They hear of stories where people are making huge profits investing on the stock market, or even making a living off their profits on the stock market, so beginners will want to replicate this model and do the same. Also, it is not everyone who is able to make high returns consistently every year on the stock market. As a general rule, you will never beat the market on a consistent basis. You could have some good year where you are able to beat the market in general, but you won’t be able to reproduce these gains on a consistent basis. So, definitely as a beginner, you should have a reasonable goal, a realistic goal, aim to make those returns on a CONSISTENT basis year after year, and with the power of compound interest and time, your portfolio will grow fast, and one day when your portfolio is big enough, you can live off the gains of your portfolio, if you are consistent.

Impatience

It is very important to be patient when investing on the stock market, probably the most important trait to have when trading on the stock market. You must be patient when BUYING and when SELLING. You can’t just buy at any time. It is important to buy at the right price, and sometimes you have to be patient to wait for the right price before you buy a stock. Sometimes, we want to participate so badly into a stock, that we are eager to buy without caring at what price we buy at, but the profits we make from the stock market comes from 2 sources, capital gain and dividends. In order to make capital gains, your selling price has to be higher than your buying price, and to give yourself the best chance at that, you need to buy low, so that is why it is important to be patient when buying a stock, if you have to wait for a stock to drop before buying it or looking for another opportunity instead, then you should do that.

Overconfidence

When beginners or new investors start making good trades or profitable trades on the stock market, which might have been due to some lucky trades, this might cause some overconfidence which can be dangerous because you will start feeling invincible and that any trade you make will be profitable. It is important to stay grounded and to realize when you got lucky and when you actually made a good trade.

Following the crowd

Biggest mistake a beginner can make is getting stock tips from forums, friends, social media, etc… It is important to do your own research and pick your own stocks. Nothing wrong with taking stock tips from others, but what’s dangerous is following these stock tips blindly, without doing your own research. Usually, people buy in strength seeing that a stock is going up so they don’t want to miss out on the opportunity so participate while the stock is already high, and sell in weakness because they are afraid the stock will collapse so want to take out anything they can get, but the investors who make rational decisions, will buy a stock in weakness, and sell in strength.

Ignoring the fees

Beginners will forget the fees involved when buying and selling stocks, and will trade with small amounts, that could end up eating their potential profits. On average, a trade will cost you 10$, so if you buy and sell a stock, it will cost 20$, so if you are trading with $1000, that represents 2% of your investment, so quite high.

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