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Putting all the money in one investment
You should never put all your eggs in one basket. Investing 100% of your capital in a one market, whether it is the stock market, commodity futures or even bonds is not a good move. Because if one market does not perform well than all your investment will go for a toss but at the same time if you are diversifying your investments the losses will be less. Although you may eventually decide to throw diversification to the wind and put all your available capital into these markets once you are familiar with them, it is better to risk a little bit of capital at a time. This way, the lessons learned along the way are less costly, but still valuable.
Chasing News
Investing on news is a terrible move for first time investors. The best case scenario is that you get lucky, and then keep doing it until your luck fails. The worst case scenario is that you get stuck jumping in late (or investing on the wrong rumor) time and time again before you give up on investing. Rather than following rumors, the ideal first investments are in companies you understand and have a personal experience dealing with and which you believe are fundamentally sound and currently undervalued.
Cheap-priced shares means safe investment
That is strictly not true, as the low cost of a stock might mean that the corporation doesn't have a great fundamental base. The market reasons the basics over the long-term. So even if you may see such shares shooting up pretty fast in the small-term, over the long-term their costs will crash. So instead of being concerned about the costs, consider the business of the corporation. Use the fundamental research techniques to define whether to obtain the stock or not. Remember investing in shares means you're purchasing in the business.
Hints & Tips are a sure shot way to earn money in the markets
No, that isn't true. Most agents tend to give hints meant for traders and not investors and traders follow a different strategy from investors. So these hints don't work well for the investors. As an alternative, do your personal investigation and then select the shares to invest because nobody can predict for sure what will happen in the market.
Leveraging Up
Leverage is a double edged sword. Using leverage magnifies both the gains and the losses on a given investment. Learning to control the amount of capital at risk comes with practice, and until an investor learns that control, leverage should be best taken in small doses.
When you are starting to invest, it is best to start small and take the risks with money you are prepared to lose. As you gain confidence and become more adept at evaluating stocks and reading the market sentiment, you can start making bigger investments. None of these investments are bad in and of themselves, but they do tend to be very unforgiving towards rookie mistakes. Leverage, penny stocks, news trading, etc. can all become part of your investing strategy as you learn, should you choose it. The trick is learning to invest in more stable markets before you jump into the volatile markets.
So remember these mistakes when you're planning to invest in shares. It is healthy to obtain primarily great shares with a long term view to accumulate wealth.
References:
1.) Investopedia
2.) Wikipedia
3.) "Trying to Plumb a Bottom", By MARK HULBERT, 1999
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Avoidable mistakes by first time stock market investors
Due to plethora of brokerage houses providing online trading facilities stock market trading has become very easy these days. This ease of access is great because it encourages more people to explore investing for themselves, rather than depending on mutual funds or expert advice. However, there are some common mistakes that the first time investors should avoid and should be aware of before they start investing. Some of these mistakes are:-
Putting all the money in one investment
You should never put all your eggs in one basket. Investing 100% of your capital in a one market, whether it is the stock market, commodity futures or even bonds is not a good move. Because if one market does not perform well than all your investment will go for a toss but at the same time if you are diversifying your investments the losses will be less. Although you may eventually decide to throw diversification to the wind and put all your available capital into these markets once you are familiar with them, it is better to risk a little bit of capital at a time. This way, the lessons learned along the way are less costly, but still valuable.
Chasing News
Investing on news is a terrible move for first time investors. The best case scenario is that you get lucky, and then keep doing it until your luck fails. The worst case scenario is that you get stuck jumping in late (or investing on the wrong rumor) time and time again before you give up on investing. Rather than following rumors, the ideal first investments are in companies you understand and have a personal experience dealing with and which you believe are fundamentally sound and currently undervalued.
Cheap-priced shares means safe investment
That is strictly not true, as the low cost of a stock might mean that the corporation doesn't have a great fundamental base. The market reasons the basics over the long-term. So even if you may see such shares shooting up pretty fast in the small-term, over the long-term their costs will crash. So instead of being concerned about the costs, consider the business of the corporation. Use the fundamental research techniques to define whether to obtain the stock or not. Remember investing in shares means you're purchasing in the business.
Hints & Tips are a sure shot way to earn money in the markets
No, that isn't true. Most agents tend to give hints meant for traders and not investors and traders follow a different strategy from investors. So these hints don't work well for the investors. As an alternative, do your personal investigation and then select the shares to invest because nobody can predict for sure what will happen in the market.
Leveraging Up
Leverage is a double edged sword. Using leverage magnifies both the gains and the losses on a given investment. Learning to control the amount of capital at risk comes with practice, and until an investor learns that control, leverage should be best taken in small doses.
When you are starting to invest, it is best to start small and take the risks with money you are prepared to lose. As you gain confidence and become more adept at evaluating stocks and reading the market sentiment, you can start making bigger investments. None of these investments are bad in and of themselves, but they do tend to be very unforgiving towards rookie mistakes. Leverage, penny stocks, news trading, etc. can all become part of your investing strategy as you learn, should you choose it. The trick is learning to invest in more stable markets before you jump into the volatile markets.
So remember these mistakes when you're planning to invest in shares. It is healthy to obtain primarily great shares with a long term view to accumulate wealth.
1.) Investopedia
2.) Wikipedia
3.) "Trying to Plumb a Bottom", By MARK HULBERT, 1999
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