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Rookie Mistakes New Investors Make

Out of the several mistakes made by fresh investors, some are more common than the rest. Ever since the dawn of the modern markets, investors have been making these same mistakes over and over again and the likelihood of them committing the same errors even in the future remain high. Investors can significantly boost their chances of achieving success by learning about these typical errors and taking the steps needed to avoid them.

What are the most common mistakes made by fresh investors?

There’s a need for accepting responsibility – for a person’s life and making choices that are not just ones for immediate short-term comfort. You need to make an investment, and the investment is in health and education. Buzz Aldrin

No clear plan

Fresh investors that have trying to make investments are enthusiastic but typically have no plan in general. They are not aware of whether they want to accumulate $100,000 for the college education of their child or $2 million for retirement by the age of 60.

They are not interested in beating the market. They usually do not have a written plan which will help them by providing guidelines for a sound long-term policy even in the times when the market conditions are not stable. Having an appropriate plan and sticking to it may not seem exciting or fun but is more likely to be profitable during the long-term.

Short-term goals

Individuals who are planning for retirement 30 years down the line should not be concerned about how the stock market functions in the immediate future. Individuals that are looking to leave some assets to their heirs should also not be concerned about this matter because they have plenty of time on their hands. The problem with the mistakes made by fresh investors is related to the fact that they are focusing on the short term and perhaps expecting immediate returns. This is another one of the mistakes which are hindering their progress towards the goals they have in mind.

Paying too much attention to the financial media

Another mistake made by fresh investors includes relying too much on the financial media without understanding there is nothing in the financial news which can help to achieve the goals they have. Even the newsletters that are published of providing people with little value which would be difficult to identify even if the information was authentic. Fresh investors are required to understand that people who have stock tips that are profitable are not likely to give out the information on TV or newsletters because they are greedy enough to keep their mouth shut and make their money without having to provide advice or sell newsletters for a living. Therefore the financial media is better ignored by fresh investors who should be looking for authentic information.

Investing is better than speculating

Fresh investors are at an advantage in the investing life. They have the wealth necessary for the investment and the time at their disposal to take the risks required. This is because a fresh investor has the time to recover any losses from other resources if they lose money by making the wrong investments. Fresh investors typically do not understand the investment process and are inclined to speculate. Speculation is similar to gambling and is also dangerous. Rather than speculating or gambling fresh investors should be looking to make investments in companies that are classified as high-risk but are offering a greater upside potential in the long-term. A fresh investor will be better equipped to accept the challenges and take advantage accordingly.

Fresh investors typically do not understand the investment process and are inclined to speculate. Speculation is similar to gambling and is also dangerous. Rather than speculating or gambling fresh investors should be looking to make investments in companies that are classified as high-risk but are offering a greater upside potential in the long-term. A fresh investor will be better equipped to accept the challenges and take advantage accordingly.

Not asking enough questions

Stocks tend to fluctuate regularly and fresh investors may expect it to bounce right back without understanding that the stock may be down for a good reason. An important factor in making investment decisions is to ask questions. If an asset is trading at 50% of the value of the investor that should be a reason why it is behaving in this manner and the responsibility of getting the answers lies on the shoulders of the investor. For some reason, fresh investors are averse to asking questions when they are required and continue to believe they can make decisions without trying to locate the information which is required.

Maybe we should teach schoolchildren probability theory and investment risk management. Andrew Lo

This article is not trying to point out at the mistakes made by young investors and trying to dissuade them from making investments. It is just an attempt to point out at the most common mistakes that are being made by youngsters who are in the process losing a significant amount of money in the markets.

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