We all are aware about the famous saying; we grow by learning from our mistakes. While this is perfectly true but in the stock market, this might have the worst repercussions. Being the first time investor, we can easily get confused about which good stocks to invest in, which might bring growth and lesser risks. Although it is not that easy for a novice investor to be all-knowing about the stock market but thorough guidance can help them into achieving what they expect from the market. Here are some common mistakes which first time investors make while entering into the stock market.
Knowing is better than regretting
It is the basic assumption that whenever we start any work, we should have a proper knowledge about everything which revolves around that work. Similarly, it is better for a first time investor to do proper research work and have complete knowledge about stock market. If you plan to hire a financial planner you should know the fees and costs their services would incur. You should research about the company, their business plans, trading patterns, current trends and so on.
Not paying heed to the losses
It is quite unlikely if the investors are investing their money into those stocks which are mounting up the losses. Best stocks for first time investors help in avoiding the losses and for that one needs to identify the loss properly. First time investors often cling to the losing position in a particular company with the hope of getting better in some time. You should take quick action as soon as you get to know about the changes in the stock market rates and stop investing in that particular company.
Diversification as ultimate solution for first time investor
It is always better to invest in different stocks rather than investing all your savings in buying stocks from a common source. You should also invest in international stocks which would enhance the look out of your portfolio as well. This will also help you in being saved from the unexpected turn of events and being abashed by the loss in the same kind of stocks. You should always know where to enter and exit from particular stock purchase and diversification will lead to the better results.
Excessive use of margin or leverage
It is the worst mistake made by first time stock buyer who borrows money to purchase securities without knowing fully the worst effects of it. They believe in getting free access to money for buying the stocks and thus tend to buy stocks which are unsuitable for their financial standing. If the market doesn’t go as expected by the investor, it would lead him into incurable debts. Thus, margin should not be considered as an accessible option rather as a last resort.
Doing what others are doing
It is always difficult for new investors to go against the herd and taking an individualistic risk, which others would not have taken. They tend to follow the traditional investors and invest in stocks which are either too high for new comers or are about to be getting off the market. This following the group of investors who are experts in handling the exiting trades, leads the first time investors into being trapped in the illusion of growth and development.
While stock markets change unexpectedly fast, first time traders should not shy away from investing into different stocks. They should try to avoid these common mistakes in order to flourish in the market.