After converting your first profit, the stock market may look like your long missed call – why am I doing the average nine to five again? The truth is that while you can increase your investment in one day, you can just lose everything by making some very common mistaken protagonists.
Before you end up blowing all your money on the next Enron, keep in mind that these seven investments are failing.
1. Two stocks are marketed in the morning, they trade two stocks at night
Trust me, you trade two more stocks in the afternoon will not make you feel alright.
Marketing can give you the most mature adrenaline rush you've ever had. I'm sorry to say, like many other things, it's not good for you in large quantities.
UC Davis and Berkeley Professors Brad Barber and Terrance Odean made a series of studies the behavior of individual investors. They have found that overexploitation is linked to the pursuit of emotion, excessive self-confidence, despair, and even sex. According to the study, "Men's tendency to aggressively trade and the resulting transaction costs detract from men's performance."
Remember, smart deal is not to earn cash and spend it. Transaction fees and taxes should be taken into account in your planning.
2. Invest in what you know
You may have heard over and over again that diversifying your portfolio is the key to making it less intolerable. The problem is that most investors do not seem to be diversifying enough. Among the rare investment mistakes studied by Barber and Odean, the diversity or lack thereof was one of them. Iconoclasm was the main culprit.
They found that many investors still have a large part of their portfolios invested in company shares. Similarly, investors often prefer national and local investments vis-à-vis global companies, which could give them more diversity – and therefore greater security.
Just to put it in perspective, Enron employees had 62 percent of the assets they had retired invested in the company when they went down.
3. After the buzz
One of the worst financial decisions is to follow the stock market tips from popular TV programs. If you've seen the Money Monster movie, starring George Clooney as a top financial analyst who meets the truth of the television, you'll know who I'm talking about.
TV celebrities have to make their shows fun by adding "Buy Now" and "Sell! Sell! Sell as much as they can (help fog horns and flashing letters too). the fact is, if you hear about a "big deal" on TV, it will probably be worth it.
The inspiration for Clooney's character is known to be the host of Mad Money, Jim Cramer. In his typical way, Cramer himself admissible, "This demonstration is not about receiving shares. It's not about giving you tips that will make you spend your day – advice is for waiters."
4. Keep apples, Facebook and Amazons
Curtis & Wall Street & # 39; Carroll, the commercial stock that teaches himself how to read and market stocks after being jailed at age 17, now teaches his own classes of financial education to prisoners and other members of the community who need a way out.
A common mistake that new investors see is only investing in large well-known companies.
"Buying large pieces of equity is the way you can build wealth and portfolios, but regular people do not have the money they need to buy such a large stock in big companies that are easily predictable, apple or a Facebook"Carroll explained.
Instead, it suggests buying more shares from smaller companies. Although it may be more volatile, if you do your research first, it could lead to a much higher return on your investment. According to Carroll,
"Right now, Amazon trades more than $ 1,000 per share. What are you going to do, buy one share? People do it, but it's not even worth buying. You will never have enough money to see that this strategy is mature. "
5. The investment is only for cold hard cash
While ethical investment was once considered as more than charity, enough studies have proved that this could not be more wrong. Businesses centered on ESG (environmental, social, governance) outperform those with weak ESG between 2.16 to 6.47% higher annual return on shares.
Not only is investment in sustainable businesses profitable, Harvard professor George Serafeim also claims that social pressure fueled by ethical investment can influence companies to meet their MDG commitments.
In May 2018 the United Kingdom saw one always high of listed stock exchanges with environmental or social objectives enter the market and work better than their respective counterparts. Investors have spoken, with an increase of £ 138 million spent on moral capital, compared with £ 32 million. The previous year.
Now he pays to do the good.
6. Running on profits as a raider
The most common commercial mistake that people always regret is sold at the wrong time. If you had one bought the Tesla stock at $ 23 and sold it quickly when it hit $ 58, according to Lee Freeman-Shor, author of the Performing Art, you are the typical example of a "raider & # 39;.
After analyzing the investment standards of the executives in his investment company, he described the invaders as those who would sell a stock when it reached a 20% increase. He calculated that 66% of all the investments that were raised were sold around this 20%. However, 61 percent of them continued to grow in value after they were sold.
The most successful investors are knowledgeable. Their strategy is to sell a certain percentage after an increase, but to retain the bulk of their investment in case of further growth. Even though these investors were not successful in selecting the winners, these profits made them more successful overall.
We can not all know the merchants, at least not immediately. Social trading platform eToro has reached a solution to bridge this gap: newbie traders can directly copy the trading strategy of more experienced investors by using an automated function on their website. Once you have enough confidence to start your own transaction, you can even start earning passive income as other users are copying your portfolio.
7. He does not learn from trade fails
Loss of money in a trade can be tough. It is a blow to your confidence and this can cause you to turn to either a quick disappearance of fire trade, desperate to win back your lost earnings.
It is often said that one of the biggest mistakes that new investors make is getting emotionally. According to the psychologist of negotiation, Dr Brett Steenbarger, the most important thing is what you do with this feeling. In cooperation with professional financial traders, he noticed that there were three types responses to losing money:
- The people who went into this emotional binge trade
- The people they felt were victorious and stopped trading for the day
- People who feel they've won, stopped trading for the day and spent calculating where their investment strategy went wrong
In the long run, Steenbarger found that those who returned to analyze where they were slain were more likely to be successful in the long run. Instead of emotional trade is the problem, in his view, the failure to learn from failures is the problem.
Every investment you make should be guided by analyzes, logic and scheduling. If even after this to lose, keep in mind, the market is extremely difficult to predict. You will lose sometimes, but by avoiding these mistakes, you could also win big.
Keep in mind that CFDs are complex media and come at a high risk of losing money quickly due to leverage. 65% of retail investors' accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and if you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. This is not investment advice. Your capital is in danger.