The investment game isn’t for casual players, but it’s something that countless people try to get into because they see the substantial financial potential some stocks can have. When you’re first starting out and begin to see a modest return on your investments, it can be easy to think that you know everything. You may assume you’re ready to start taking bigger risks and putting in a bit more money, but you shouldn’t let your modest success trick you into making bad decisions.
If there’s one thing Mark Matson hears a lot of, it is complaints from investors who started off well, but now find themselves in a world of financial trouble. It can be difficult and a little embarrassing to find out that something you thought was going to bring in a lot of money is actually messing up your portfolio. Don’t make the same mistakes that many new investors make and avoid these common pitfalls:
Going for what’s hot instead of proven good stocks
You just heard that a hot-shot billionaire swears that they have the next big thing in the market, and people everywhere can’t stop talking about it. You end up investing the majority of your assets into the hot new stock, and end up losing a lot of money in a few months when things cools off. Everybody dreams of “getting in on the ground floor” of a stock and making it big, but a lot of these new “innovations” and ideas people are trying to invest in may not have staying power. Stocks in resources and transportation have been known to do well long-term, but new fads and gimmicks generally don’t.
Going “all in” on one stock
Despite what you may have heard from some of your fellow hot-shot investors, there is no such thing as a “sure thing” in the stock market world. When people start seeing their stock of choice rise, they often put more money in and assume that it’ll keep going up. Others may have heard rumors that a certain company is about to release some sort of groundbreaking product, and end up shifting all of their money and focus into that stock. The secret to making good investments isn’t to dump everything into one place; it’s to have a diverse stock portfolio so that you can keep earning from a variety of investments.
Ignoring plans for “potential profit”
You’ve been telling yourself that you will sell your stock as soon as it hits $100 a share. The day finally comes but, since it hit $100, you’re thinking that it could go up a bit higher; instead of selling, you decide to wait and see how far it can go. That may sound like a bold strategy, but sometimes your old plans are much better than your new ones. Don’t wait for a potential rise in value that may never end up happening. If your plan is to sell your stocks when they hit $100 or to buy certain stocks when they get cheaper, stick to it.