Common Investor Mistakes – 2019
Below we have listed a few common investor mistakes. Try to avoid making these mistakes with your investments.
Falling in love with a position –
An account has limited capital, so ask yourself if the position is the best one to be in here. Are you tying up capital that can be put to better use elsewhere? Don’t get sucked into the fundamental story—that is, don’t hold on to a stock whose technical picture has deteriorated just because you are intoxicated with the reasons for your choice.
Buying the stock right, but forgetting to sell it right.
There are two foul shots to make successfully with respect to investing. You must buy the stock right, and then you must sell the stock correctly. Therefore, once you buy a stock you must review it on a regular basis; don’t just forget about it. Attempt to sink both foul shots.
Not having a game plan for investing.
Investors will haphazardly, especially in a strong market, pick stocks to buy, thinking that the stock market is easy to beat. They fail to realize there is risk, not only reward. Therefore, it is essential to have a game plan that helps dictate what stocks to buy and when, and also tells you when to sell or play defense.
Buying stocks that are extended.
When you buy a stock that is up on a stem, it increases your risk and diminishes your potential reward. Rather, it is best to buy a stock when it pulls back closer to support, thereby increasing the potential upside reward, and diminishing the risk to the stop-loss point.
Taking small gains, but not being willing to take small losses
Be willing to take small losses by adhering to your stop-loss points. Avoiding large losses will keep you in the game. You will not be right on every trade, so be willing to bail out and take the small loss when the technical picture so dictates.
Buying a stock that is trending down, thinking that it is cheap, or a value.
Often, these types of stocks become an even better value because they continue to fall in price. Ideally, it is best to stick to stocks that are in an overall uptrend, trading above their bullish support line and exhibiting positive relative strength. These are the stocks that are in demand and should be considered for purchase.
Acting on poor advice, tips, and financial media hype.
Many investors try to get rich quick without doing their homework. They rely on the TV or financial media to tell them what to buy. Instead, take the time to educate yourself, to arm yourself with a game plan. Then you will be able to make sound, informed decisions. Take responsibility for your own success. Don’t rely on get-rich-quick schemes and rumors. Do your own research.
Getting emotional and not being able to stay objective.
Any investor knows that emotions can be your worst enemy. Try to stay objective. The point and figure chart helps you accomplish this because a picture paints a thousand words. When looking at the chart, cover up the name of the stock. Make your decision on what the chart is telling you, therefore taking the emotion out of knowing the name of the stock.