When people first start out investing they typically make a few mistakes before they begin to make any money. For young people this is particularly so – having extra money is usually quite new to them and they may have only just recently begun to achieve other financial goals. Many first time investors will often lack the time necessary to properly research their investment choices before they make them. It can be difficult to know where to start.
Investing in stocks is a mind boggling step – one that is endlessly complicated by an array of factors, from election results and oil production, to biotech success and failure. Even the most experienced investors will never truly understand all of the ins and outs. However, those who immerse themselves in their chosen markets, such as Robert Stones Target Markets, do begin to learn about how specific market forces can have an effect, and as a result identify potential risks and opportunities.
Investing in ‘Cool’ Stocks
Tempting as it isto invest in trendy stocks, and whilst it can work (Apple in the 1990s –), spotting the good ones is hard. If you want to go for it, research the company, its position in its specific industry and how that industry relates to other industries. Only invest what you are willing and can afford to lose.
The Passage of Time
Not giving investments enough time to mature is also a common mistake. Intelligent, well thought out and properly researched investments will usually grow over time, so the longer you can afford to leave them to mature, the better.
This is probably the biggest and most common mistake rookie investors make. Given the true complexity of the market forces, there is very little way of meaningfully anticipating the direction of the markets. Even those with deep inside knowledge can misinterpret the signals. In order to avoid heavy losses, it is best to invest in things such as index funds, if you have both a good amount to invest and can do so on a regular basis. Generally these investments will gain value over the longer term, but investments based on one off speculations are rarely profitable.