10 Investing Mistakes You Should Avoid At All Costs

You may be a beginner, or you may be a long term investor, but there are multiple things you keeping missing.

There are multiple things you also need to keep in mind while you consider a possible investment. Doing your homework about a company and being patient are main keys to investing.

Mistake #1: Not Researching the Company

Before investing in any stock or security, you need to research the company. If you do not take the time to research the company, you only have yourself to blame if you later learn things about the company you do not like or if it depreciates.

Researching the company is one of the first things to do when you are looking to invest in a company.

The company might look good from the outside, but once you do more research into their background from the start of the company up until today you will have a better understanding of them as a company.

You will learn about what kind of company they are from whether they have been making their quarterly results to whether they are environmentally responsible compared to the rest of the companies in the same industry.

Mistake #2: Buying when the price is on the rise

The old saying is: “Buy low, sell high”; this is still the way to buy stock. If the stock is popular and is on the news, it will be one of the more traded stocks on the market because everyone is paying attention to it. Buying high only ensures that you will lose more when the market turns. 

Being patient is key to managing the stock market. You need to be patient and wait for the right time to invest. You will also need the patients to hold when the market is on the downturn.

Not everything can be high all the time, and sometimes your investment will be worth more for holding it.

Mistake #3: Buying securities, you do not understand

You want to invest in the latest type of security, and the internet tells you that certain stocks are the “best” of that category. If you do not know anything about what you are buying, you shouldn’t buy it.

A good example of this is the rise of cryptocurrency. Yes, you can invest in the companies associated with cryptocurrency, but you can also invest in cryptocurrency and use it to buy and trade things around the world.

There are two different ways to approach this newer security. It is up to you to research which one will be the best for your portfolio.

You will need to consider whether you will be buying anything with actual cryptocurrency or whether your world has yet had a reason to invest in the currency for active use yet. You can still invest in the companies that are mining the currencies for future portfolio growth.

Mistake #4: Spending money you can’t afford to spend

If you have not been systematically saving to make your first investments without hurting your life needs like food and shelter, you should not be investing.

Before investing, you need to have your nest egg put together first. If you need the money you are investing in other things such as food, rent, or shoes for your children you should not be investing.

A wise investor gathers their resources together from the income left over after paying off the bills, contributing to their retirement, and other savings first.

They also do not put all their leftover savings into it their investing. Everyone also needs to have an emergency fund set aside first, so they have extra savings.

Mistake #5: Impatience

Waiting is hard for the new and the old investor. You have found the company you want to invest in, but the price isn’t right. Time is a friend to the investor.

We are currently in a bull market, but the best time to invest is at the bottom of a bear market. Buy high and spend low. Sometimes you have to wait for years.

Watching particular securities go up and down for weeks is hard, but once you know how it moves you will have an idea of its future movements.

You can learn some of this through studying the past movements of the stock, but being patient will pay off with a stock price that is what you want.

Mistake #6: Letting others make your financial choices

Just because the news or your friends says that particular security is the best to have in your portfolio, does not mean you should immediately add it.

You need to understand what you will be investing in without others making this choice for you. It is your portfolio, and only you can decide what to include in it.

Mistake #7: Trying to average down a bad purchase

Everyone “jumps the gun” when they invest. Buying a stock too high, and it falls immediately afterward. The common thinking is to buy more when it is low and take the average. It comes out to lower overall investment, right?

You may have just invested in a stock doomed to fall further, and you will end up losing all of the investment. Averages do happen, but only on stable long term securities. In a lot of cases, you never get the true value of your investment back.

Mistake #8: Too many risky ventures

A well-balanced portfolio is one that covers all sectors and has a mixture of long term strong companies. Having a mixed portfolio helps keep the portfolio balanced during a downturn.

It also protects the investment. If your portfolio is made up of penny stocks that you can buy a lot of, you are more likely to lose money even if they are all good investments.

Mistake #9: Having no Plan

Everyone has a style to their investing. Most people do not have the time or inclination to sit and watch their stocks all the time, so they set limits and stops to do the work for them.

They also do not frequently trade because of the fees that come with many active accounts. An early investor learns how they tend to approach their investments and should stick to their plan.

Mistake #10: No stop-loss orders

A stop-loss order is one set to your accounts to prevent them from falling beyond a certain point. These stop-loss orders protect securities from when the market turns or has a seriously bad day.

They automatically sell when it has reached a certain low level you have set to prevent a complete loss of your investment. It is a tool used by new and old investors to spare portfolios agonizing losses.

Avoiding Your Losses

Being patient and doing homework is the way to approach any investment. You need to have an understanding of what you are putting your money into and back the companies you choose. It is a matter of research and creating a balanced portfolio.

A balanced portfolio has multiple securities in different sectors and multiple types of securities. Being patient with a well-balanced portfolio protects the account because not everything does well all the time.