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Mistakes are commonplace in life; but when it comes to mistakes in the financial sector it goes without saying that the implications can be a lot more significant.
A slight miscalculation can result in huge losses, while an investment in the wrong company can have similar repercussions. In short, you have to know what you are doing.
This is the reason today’s post has been put together. We are now going to look at some of the most common mistakes in relation to investments, and the steps you can take to ensure they don’t happen to you.
Taking advice from “tips”
According to Gregory Lindae, this is a primary mistake with novice investors. Making a financial investment isn’t like heading to the horse racing; it’s a huge commitment on your behalf and you can’t just trust anyone who sends information your way.
Even if it’s one of your trusty friends or relatives, buying into exactly what they are telling you is a recipe for disaster. You need to research the area yourself to verify that everything is genuine.
If this doesn’t occur, you are entering the investment blind and don’t know all of the minor details that can impact it.
The perils of day trading
One of the biggest enemies to the new investor is turning to day trading. This is one of the most dangerous types of investing you can try your hand in, for the simple reason that the situation is constantly changing and it’s much harder to predict fluctuations.
As well as the above, those who participate in day trading usually have a huge arsenal of equipment behind them. The software that is required to make a real success of this form of training is expensive to say the least, and can set you back tens of thousands of dollars. Suffice to say, if you are inexperienced in this field anyway, this is a huge amount of risk.
It’s also worth mentioning that this is one of the most stressful forms of investment out there. As such, if you struggle to deal with stress, you really should question if this is the right direction for you.
Buying stock that is comparatively cheap
As an investor beginning your journey, it can be incredibly tempting to pledge your money with a stock that seems cheap, at least in comparison to the 52-week high of the stock. This is a decision that is made all-too often, with new investors seeing the huge difference between the current price of stock and the 52-week high and immediately pledging their money.
The big problem here is that you don’t know why the stock has fallen. Sure, on some occasions it might be due to seasonality, and this is where you can coin a large profit. On others, however, it might be due to the fact that a new competitor has entered the mix. Clearly, this is going to have longer-term repercussions; ones which might make a recovery nigh-on impossible.
