If you are a novice looking to invest your hard earned money in stocks and shares, then it is important for you to understand the mistakes you should avoid as a rookie.
The Following are some of the common mistakes that a person looking to invest in markets afresh makes.
Never allow emotions to come between investing
One of the common mistakes that DIY investors make is to quickly switch their investments into cash because of fear or greed. You need to understand that it is a marathon out there and you need to wait for various market cycles to happen before even thinking of selling of your investment in the market. It is better that you prepare a proper written plan with your goals and objectives before investing and also the funds you intend to allocate for trading in markets.
Never trade more
There is no doubt that trading has costs attached to it. The more you start to trade, the more costs you will incur. You should always think of buying assets at a reasonable price and have the will to hold on to the assets for long. Never ever switch in and switch out of funds quickly as commissions will eat your money.
Never think of timing the market
Many people start to invest in the market with one goal in their mind, buying at low prices and selling at higher prices. You should never trade with this intention as there are millions and millions of wise people trading in the market and this plan will not work every time.
Stay clear of poor diversification
It is vital for you to not invest all your money in one stock that you feel will help you to earn money. You should diversify your investment into a wide variety of classes. This will help in reducing the risk in your portfolio. Diversification does not mean that you have to own more stocks. You should have knowledge about how investments are moving in relation to the other.
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Patience is the key
If you are looking to invest in stocks to fund your retirement or to take care of your child’s college education, then make sure that you have lots of time on your side. You need not check the status of your portfolio every hour. You just need to review them on a quarterly basis. You need not worry about markets varying every hour and concentrate on analyzing the performance of the companies in the markets.
Opt for transparent advisers
If you are looking to find a financial adviser to help you out in investing your money, you need to look for one who is quite transparent. You should know how advisers are paid. Some advisers charge you on a fee based system, while others would charge a commission on the financial products that they sell. The source and the amount you pay have to be properly considered. You will have to pay your adviser, according to the type of service you want.