4 Major Stock Investing Mistakes

When it comes to investing, I can promise you one thing: you will make mistakes. Ask any experienced investor, and he’ll admit some major failures as well. You’d better get mentally prepared for it. Having said that, there are a few mistakes any new investor seems to make. I’m happy to show you the four most common mistakes made by newbie’s and how to avoid them. Buckle up - here we go.

Mistake #1 - Start too late
You are never too young to start investing in the stock exchange. Get started as soon as humanly possible.

The perception of investing is that it’s limited to grey haired, financially established men (not women!) who can invest great amounts of money. This is a major misconception. And even worse: it’s limiting people (you?) from exploiting the power of making your money grow and grow and grow. Start today. Now.

Why such a hurry? Waiting to start investing will make an immense difference in your financial destiny. Want proof? Investing $2000 a year (that’s barely $170 a month) starting at the age of 36 and an ARR (Annual Return Rate) of 10% can yield $802,895 at the age of 75. Nice amount of money right? Well, it could have been better. Much better. If you had started at the age of 26, that same investment would have resulted in a return of $2,114,379.

Let me do the math for you: the same investment, with the same ARR but with a 1.3 MILLION dollar difference…

Not able to invest as much as $160 a month? Set aside $100. Or even $25. Believe me: even this small amount can have a large impact in the long run.

Ready for Mistake #2? Here we go. It’s a fundamental mistake made by the overwhelming majority of new investors. Promise me one thing. After you’ve read this article, ask yourself this question: would I have made this mistake? Be honest. I’ll give you my answer before you even know the question: yes, I made that mistake as well. Ready?

Mistake #2 - Not Understanding The Company
It’s shocking! Most people will put more time, energy and research into buying a blender than they will in buying stocks. Of course, they take a quick look at what the stock price is doing, but there it stops. It is however imperative that you take the time to interpret the financial history of the companies you wish to participate in by buying shares. It’s important that you can explain what you are buying, why you are buying and how it will benefit you in the long run.

Having said that, it’s also crucial to stay objective while selecting stocks. Forget the story about the monkeys who are outperforming investment pro’s. In the long run (and that’s what you are after) the pro’s will always come out on top. It’s almost a law of nature: stocks that you’ve researched well and carefully selected are more likely to do better than stocks you choose based on a feeling. So put your emotions aside and consider your options carefully. Like Nike? By their shoes, but not necessarily Nike shares.

Another poor judgment issue - let’s say it’s Major Mistake #2a.
When choosing a financial coach or advisor, also take time to research and investigate. Consider meeting with a couple of candidates. Talk to them about their approach to investing. See if they understand what you’re looking for. And one last tip: if you are meeting with someone on a recommendation, make sure that the person who recommended the advisor is someone who’s qualified to do so. How? Just ask how his shares are doing…

Ok, Mistake #3. You’ve probably heard this a gazillion times before. And for a very good reason. It’s a recipe for disaster. And it is also one of the most neglected and violated rules of investing. Why? Not because investors are stupid, but because they are either lazy or greedy. Or both…

Mistake #3 - Putting All Your Eggs In One Basket
Don’t underestimate this old adage. In any portfolio, you will want to diversify your holdings. Spread your money not only over several different companies but also over different industries.

Why people ignore this rule? Most common reason is laziness. Let’s face it, its harder to find four promising companies than one. It’s harder to find three industries with an upbeat future than one. It takes work to built a diversified portfolio. Most people hate work. They’re after the lazy dollars.

Another reason why most investors have a very thin focus is good old fashioned greed. Suppose you have a portfolio with say five different stocks. One is slow. Three are doing ok. One is making you a small fortune. What do you do next? Sell the slow and average performing shares and invest your dollars in number five? Or do you believe in your initial game plan and stick to it? The fact is that most investors fall for the low hanging fruit – not seldom to find it was already harvested and the rally didn’t last. What they end up with, is a few eggs in a very expensive basket…

Saved the best for last. Major Mistake #4. But… you will probably not like this closing part. It undermines the reason most people (you?) start to invest in the first place. But please, please, please take my advice. It will save you from big disappointments and maybe even from going bankrupt.

Wow.. THAT serious? Yes, THAT serious! Get ready for a reality check.

Mistake #4 - Confusing Wall Street for Las Vegas
I guess I do not have to explain the fundamental differences between Wall Street and Las Vegas. But since you are fully aware of that difference, then why the [censored] do you (Oh no, not you of course, just those other guys) keep confusing gambling and speculating with investing?

Investing in stocks is part of a long-term financial game plan (game – bad choice of words by the way!) and not a get-rich-quick scheme. Day trading for example, has nothing (nothing!) to do with investing. Sure, you can make good money from it – when you know what you are doing and threat it like a J*O*B.

Sure, living the fast lane can be fun. And extremely profitable. But don’t ever say your are ‘investing’ your money. Your speculating. Gambling. If you feel attracted to it, set apart some ‘gambling money’ and make sure you can afford to lose it up to the last penny. Or don’t even bother and go to Las Vegas straight away to have some fun.