When jumping into a new endeavour, there are growing pains. People make mistakes. They learn as they go, even if they have experts that are helping them get their feet wet. The same holds true for investing. There are some mistakes that every new investor seems to make, or should make an effort to avoid.
To help you get better at investing without losing a lot of money in the process, here are some of the worst things you can do.
Penny stocks are a bad idea.
Yes, you might be able to get more stocks at a lower price. If the price of that penny stock goes up, it’s all good, right?
No, it is not. What they offer regarding potential profitability is offset by the fact that they are poor quality. Companies that are not likely to be stable or profitable tend to offer penny stocks. When that happens, you could easily take a 100% loss when the price dips to by a dime.
To avoid that, you want to think in percentages. You want to focus on quality, rather than how much individual stocks costs.
Another mistake is focusing on one type of investment.
No company is completely stable. Everything can have issues; every business can have stock prices decline – sometimes dramatically. You might not see profits skyrocket when you diversify, but you also avoid the rapid free fall that comes with excessive focus.
Mind you; it’s not bad to have something you have a stronger focus on because you’re good at reading that market. What’s bad is, to use the adage, putting all your eggs in that basket.
Finally, never invest cash you can’t afford to lose.
Yes, putting money into the market in bulk generates better returns than in increments. However, never put in your savings account or retirement fund in whole. Investing is a long-term game, and if you are putting in money you will need later, you’re risking not having it when the time comes.
If you have only just enough to invest or lack an emergency reserve, don’t invest period. There are enough problems that crop up in the market without adding more to them.