5 Mistakes Every Investor Should Avoid!
Managing your money and investment accounts does not have to be complicated. It is remarkably simple, and here are 5 common mistakes people make and will complicate the process. Mistakes happen the key is to learn from them and move on. Let us look at five common mistakes that will cost you money. If you are a beginner investing your money, try to not make these mistakes. Investing money for beginners can be quite simple. You will see why I personally only trade ETF’s, they help keep emotions out of my trading, so I do not make irrational decisions. You can see this in my book or the holy grail trading strategy page. I simple living, that includes simple trading and money managing.
1. Emotional buying.
When you buy a stock because of emotions, it is usually a bad decision. Greed is usually a factor and can coat you money. When do people buy a stock based on emotions? Usually when they think they are going to miss a run and start chasing the stock upwards. News may have come out, someone, or a group of people are saying to buy it, and they do so because of greed telling them not to miss the run up, only to see not long after their purchase the stock retreats and then they fall into the next mistake. If you buy anything make sure it is a calculated decision based on a chart, long term fundamentals, anything other than emotions.
2. Emotional selling.
This usually happens after an emotional buy. Since this purchase was done on emotions and nothing calculated, (it can also happen without an emotional buy) soon as the position goes into the red greed turns to fear and you exit the position at a loss. Even if the position has a calculated entry, fear can come to play, and have you sold a position only to see it turn around as soon as you get out. You hear people say they are shaking out the week hands, no it is the emotional ones. Emotions can wreck havoc on your account. Emotions usually come into play because of the next 3 mistakes.
3. Being uneducated on where you put your money.
If you have no clue what you are buying you are buying it as a spontaneous buy or greed. Even if you are looking at charts and think this should be an easy trade, know what you are putting your money into. Traded can turn bad quickly and if you do not know what you are in when your chart breaks down you will get out and take a loss in fear of losing more in a stock you know nothing about and cannot believe in it for the long term. This is one reason to keep a brief list of ETFs and Mutual funds to invest in and trade. If I buy an ETF to trade, I know it is holdings and have the mentality that I will hold it and manage it to a profit because I believe what I buy is a good long-term ETF anyway. Not knowing what you are putting your money in will have you making emotional decisions costing you money.
4. Going all in and not having dry powder to average lower and manage trade.
Always have some cash on the side or know your cash flow every month. Managing a trade or even your investments in a smart manner requires cash flow or cash on the side lines. On my long term investments I add to them when they pullback into an Oversold position and if I am down on them I lower my average as much as possible in every opportunity I get. That requires more money to add to those positions. If I am trading a position and it drops to certain levels or percentage I also add to lower my average which makes it easier to make a profit. If you put all your money in one position and have no more cash flow coming in anytime soon, if that position starts losing money fear may cause you to cut your losses and move into the next one. On the other hand confidence and cash flow will motivate you to keep your average low and lock in profits when the time is right.
If you are concerned with the long term growth of your money gambling is the last thing you should do. This can include anything from penny stocks, cryptocurrency, some may even consider trading individual stocks a gamble. If you read my book you will see why I only trade ETFs and I invest in all star mutual funds or ETFs I believe will be a good reason to hold for the long term. Do not gamble away your money, take advantage of smart opportunities.
Keep your emotions out of your investing and trading. That means be educated and make calculated decisions that you are willing to hold and manage for the years to come. Very few people make a living from gambling, stick to the basics, and remember living a simple life you must keep everything simple.
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