Home » Common Mistakes When Investing for Beginners
For beginners, investing often comes with a romantic notion attached. The expectation is that buying low and selling high results in fast profits, though it often fails to live up to the hype. Investing actually takes a lot of hard work and patience. Below, we guide you through the process and tell you what to avoid when investing for the first time.
Getting Information From the Wrong Places
When starting, the amount of advice can be overwhelming. There will be tips from long-time millionaire traders, social media stars, and newspaper columnists all lining up to give you advice. What they do not tell you is that even they get it wrong. Analysts who know their given industry well mess it up sometimes.
So where do you begin? The truth is that nothing beats reading the news. Make sure you regularly check up on the economy and socio-political factors. Think about how they will impact the business in which you are considering investing, long and short-term.
You can also follow independent investors on many trading apps and platforms. Investing Reviews has a breakdown of the best UK trading platforms. As well as giving the lowdown on fees and commissions, it has many options listed, such as eToro, that allow you to follow a range of independent investors. By choosing the right platform, and cross-referencing independent investor tips against socio-economic factors taking place in the world, you can get a better idea of what to invest in.
Not Understanding the Investment
If you do not understand a company you are investing in, you have no idea if its business model looks successful, or if it is going to be profitable. A company may have the greatest product and brand on paper, but if you do not understand its operations and the industry it is in you have very little to go off other than faith.
Warren Buffet, the world-famous investor, has this as one of his essential tips. To avoid it, you have two options. The first is to invest in companies that occupy positions in an industry you know about. Do your research on them and look into past quarters and financial years. Cross-reference this with the general outlook for the industry.
The only problem with this is that it limits your investment scope and fails to diversify your portfolio. To counter this, there is the option to invest in ETFs and mutual funds. They will be run by professional investors who will channel your money to the right places, and you will not need to do any research at all.
Not Giving Investments Time To Grow
Contrary to popular belief, investments are not a get-rich-quick scheme. The longer you can hold onto investments the more you will maximize your returns. You may not get the huge sums you expected at the start, but over time you could get a fair return, even if some investments do not work out.
This also comes down to expecting too much from stocks. Few low-priced stocks are likely to make huge yields, especially if you are looking for short-term gain. When you are seeking out these types of investments it usually signifies that you have not saved enough. As they are extremely high risk, this is a good time to put investing off for a while and build up money in the bank.
Hopefully, these three tips help point you in the right direction as you start your investment journey.