Investing is the easiest thing to do and there are always going to be plenty of mistakes made, but they key is to learn from those mistakes. Investing is like any other job or hobby, as a beginner you can count on making some mistakes, but as you become more experienced you should expect yourself to not let it continually happen.
An investor who is unable to adapt to the mistakes they have made in the stock market is an investor who will be unable to profit in the stock market. Don’t beat yourself up over a mistake you make, but rather make sure you remember not to do it again.
5 Mistakes an investor should always learn from:
1. Not doing research before investing in a stock – This one definitely tops the list of mistakes you have to learn from. Why put your hard earned money to work without putting some significant research into where you’ll put your money? Investing in a stock is buying a small piece of a company, so you better know the company pretty well before investing in it.
2. Blindly following the advice of any single person – This is a very amateur mistake, but it is often made. There is simply no reason to blindly follow the investment advice of any single person. You need to be accountable for what you invest your money in. If you start blaming a certain stock picker for your losses that is when you know you better learn your lesson and look in the mirror.
3. Letting your emotions run your investment decisions – Emotions are tough things to control, but if you are going to be successful investing your money you better be able to control them. Emotional investment decisions turn out to be bad ones most of the time because they are not well thought out. Leave your emotions at the door when planning your investment portfolio!
4. Buying on margin – I hope you never have learn from experience on this one, but if you do happen to buy on margin please learn from the mistake. Investing in the stock market while borrowing money is just asking for trouble, and it simply isn’t worth the huge risks associated with it. Save your money and invest, but learn not to buy on margin.
5. Buying the hottest stock in the market – It is a pretty popular thing to do to look for the stocks that have the most momentum and are really “hot” in the market, but it can also be a very good way to lose money quickly. The truth of the matter is that extremely hot stock on the street will eventually fall out of favor and it will probably lose its value quite quickly. Remember the tech bubble? Many of the stocks that ended up bankrupt were once the hottest stocks in the market. Beware the momentum players and the hot stock.
All investors will make mistakes, but it is those who learn from their mistakes and commit themselves to not making the same mistake twice that beat the market.
Aaron K. Smith is a freelance writer with experience working in the mutual fund industry and writing about investing and the stock market.
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