DO NOT DO THIS WHEN YOU INVEST MONEY! THE WORST INVESTING MISTAKES YOU NEED TO AVOID!
Number 1) Expecting too much from your investment.
This is very true when it comes to dealing with penny stocks. Most people treat low priced stocks like a lottery ticket. They try to anticipate that they can flip 500 dollars in to a small fortune.
Of course this can sometimes be true in the markets, but it is not the right mindset to adapt when you are getting in too investing. You need to set some realistic expectations. Look at the performance of the investments you are about to make. How well has the investment done until this point? Watch all other investments that are competitors in the same industry. Has the underlying investment gained 5-10% per year or have those moves been closer to hundreds of percentages? Do most companies in the industry see their shares moving 1% at a time or is it more common for them to jump 50 percent at a time?
Number 2) Buying shares in a business which you do not understand.
Many times investors are pulled towards making investment decisions based on the new trend, or what is currently hot in the market. They may know very little or even nothing about the business venture they are investing in, many cases technology or biotech business are harder to understand and might provoke you with the latest ground breaking research that will cure an illness or a new vaccine that will eliminates all the humans from the planet. This in turn does not stop them from trying to jump on what they expect to be the next profitable investment in their journey. For example, if you run a hotel you will be in tune with the businesses involved in the hotel industry. You will see first hand what is going on behind the building. You will know if the industry is booming, getting slower or cooling down way before the majority of the investors out there.
Number 3) Using money you cannot afford to risk
You would be amazed if you could see how different your investment style becomes when you are using money which you cannot afford to risk. You emotions get heightened, your stress level goes through the roof and you make buy and sell decisions which you otherwise would have never made.
There is a saying that you will eventually loose every dollar with which you gamble. You should never put yourself in a position of gambling. If you really can afford to lose the money you use to invest you should not invest in the first place. When you invest with money you can afford to risk. You will make much better trading decisions. Generally you will have more success with your trades which will not be driven by negative emotions or fear.
Number 4) BEING driven by impatience
One of the most costly things you can make as an investor is being impatient. Remember that investments in a particular business - businesses operate much more slowly than most of us would typically like to see, or even what you might expect.
For a business to come up with a new strategy it can take many months if not several years for it to start playing out. Often investors will buy shares of a stock and then immediately expect the shares to act in their best interest. This completely ignores the real timeline that companies operate in. In general stocks move slowly, much more than what you might expect them from moving. When you get started investing in companies, do not let your impatience get the best of you, or your wallet for that matter.
Number 5) Averaging down
Averaging down is typically used by investors who have made a mistake already, they might need to cover over their error. For example, if they bought a stock at 10 dollars and it drops down to 5 dollars in value, they can make the mistake of making it appear a little bit less awful by purchasing a whole bunch at the new lower price. The results is that they have now bought stock at 10 dollars, and more at 5 dollars so their average price per share is much lower. This makes their loss on the stock appear much smaller.
Number 6: Not diversifying your investment portfolio
Everyone have different investing goals, it could be because of your current economic situation or your preference of investment. This is a big reason why your investment portfolio and choices are probably unique from the next person.
But one commonality that every investor should have is that they are diversifying their investment portfolios. By putting all your money in one basket, you put yourself at extreme risk. Sure it might be doing well for a while but in the long run it can quickly crash and leave you with big losses.
When you invest you should be looking at different assets and in different sectors that can weather against downturns and help your portfolio stay balanced.
Number 7: Expecting zero risk from your investments even if you are diversified.
No matter how good your portfolio or your decisions are. There will always be ups and downs in the stock market, real estate prices etc.
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