Common Mistakes Made by New investors

PUBLISHED Apr 1, 2022, 4:23:14 AM        SHARE

imgStaff Writer

What are Common Mistakes made by Beginner Investors?

The biggest mistake new investors make is not managing the risk of their investments. The stock market is a money machine and not a slot machine. Watching for these common mistakes can improve your risk management and build wealth.

10 common mistakes made by Beginner investors

Having unclear investing goals

How do you drive to a new destination without a map? When you do not have a solid investment goal, you make investment guesses. Instead, make investment decisions. Your investment goals should consider:

  • time horizon
  • risk tolerance
  • financial needs (growth, wealth preservation, or income)
  • monthly investing goal

Being too Safe or Risky

Portfolios suffer when you make bets instead of investments. You should manage risky investments by diversifying your risk and doing your research.

On the flip side, if you invest too safely, you risk losing purchasing power due to inflation. It is important to build your investment goals so that you can make an investment plan that doesn't fall into these extremes.

Ignoring diversification

When non-diversified, your investment future gets tied to every risk placed upon a few assets.

The classic example is gold. When you are 100% in gold, you hope everyday that no one finds a new gigantic gold mine that will eliminate the scarcity of gold. Check out this chart from goldprice.org.

Gold last 20 years

Now you may think this is preposterous... but look what happened to the price of gold since "digital gold" was introduced in 2013. Gold was stymied for years when Bitcoin was introduced and is now just recently recovering to 2013 price levels.

Diversification is important to your financial health. Check out these tools from StockBossUp that help build diversity into your portfolio.

Constantly watching the markets

Green is not buy and red is not sell! For new investors, the best thing you can do is "set it and forget it". Do not let your emotions take over... that literally is what a lot of market participants want you to do.

Day traders and algorithmic traders make money off of the "emotional movements" of the market. When investors feels the same panic, hope, or fear, they all act in the same, predictable patterns. These patterns are preyed upon by traders.

These traders cannot make money off of long term investors. Long term investors know they need to take their emotions out of their decisions. Hence, a long term investor's actions in the market cannot be predicted by day traders.

Social Media and Investing

Following bad advice from social media

The goal of social media is to keep you engaged and scrolling.

Social media don't care about your portfolio

For every piece of advice you get on social media, be sure to do your own research. What you are seeing on your feed is what is going to get you to click like, not improve your wealth.

The StockBossUp app is changing this paradigm. StockBossUp trends by performance instead of engagement so that members can grow their wealth with the ideas they find. Check out how StockBossUp allows members to draft other members and build winning portfolios from their social feed.

Chasing the trends

"The trend is your friend".

That is great for advanced traders, but for beginner investors the trend is your potential nightmare. Unfortunately, it is typically the beginner investors that are the last investors buying into a trend.

Do your research before investing. Bitcoin, Amazon, and Netflix were not trending investments when they were first introduced.

Confusing luck and skill

Every investor has thought that they were great only to discover they got lucky with their investments. The worst thing that can happen to a new investor is success as it gives you a false belief that success will continue.

All investors have a losing stock, even the best ones. Investing is about triumphing over misfortunes and winning more that you lose. Investing comes down to knowledge and execution.

Growing Investments

Not giving your investments time to grow

To be successful as a long term investor, you should hold your investments for at least 2 years. If the company you purchased is healthy, then they should be reaching new all time highs in two years. Random events effect companies quarter by quarter, but well managed companies will adapt and show growth in two years.

To be a day trader, you must be dedicating at least 6 hours a day to trading. For most beginner investors, this is not practical. However, long term investments can be researched when the markets are closed. Once you have chosen your stocks, you should not be watching them often. Research long term investments on the weekend, after work or before class. Investment trades can be set the night before the market opens using limit trades.

Delaying investing altogether

Because of fractional shares anyone can invest. You should be investing right now without delay.

If you are not sure which stocks to start with, draft a team using the StockBossUp app to get 10 stock suggestions.

Forgetting about taxes

When you sell a stock for a profit, be prepared to pay 15% of that gain to the IRS. If you sell your stock within less than a year of buying the stock, then you're gains are taxed as ordinary income. This will vary based on your total income, but this could be up to 28% of the gains you made!

The Take Away

For beginner investors, be sure to manage your risk and start investing now. Anyone can be a successful investor

Part of a Series for Beginner Investors

Sound investments
don't happen alone

Find your crew, build teams, compete in VS MODE, and identify investment trends in our evergrowing investment ecosystem. You aren't on an island anymore, and our community is here to help you make informed decisions in a complex world.

More Reads
What are Safe Investments?

Safe investments have a low possibility of loss. This safety comes with a tradeoff as the return on safe investments will be lower.

What are Risky Investments?

Risky Investments have a high probability of loss. Risky investments may have a high upside, but not all risky investments are bad investments.

How do you Avoid Buying High?

Avoid buying stocks at their high by monitoring the current market value and measuring the intrinsic value of a stock versus its current price.

Crypto’s Role in the Russian-Ukraine War: Everything you need to know

It is not news that Russia and Ukraine are not on good terms, and the former head of the Soviet Union has gone to war with Ukraine over claims of allegiance with NATO. Russia has received a lot of backlash from the international community over this. In this article, we will be looking at how Crypto has played a pivotal role in the Russia-Ukraine war.

5 Ways to Promote Your Side Hustle Now

A side hustle is a business opportunity that’s usually alongside of full-time employment. The great thing about a side hustle is that it can develop into an opportunity that allows you to quit your regular job and pursue that business entirely.

Yuga Labs Launches ApeCoin and DAO: Here is what to expect.

If you have been in the crypto space as long as we have, we are sure you wouldn’t be alien to the Bored Ape Yacht Club and Yuga Labs. In this article, we will explore the ApeCoin, a token that was recently launched by Yuga Labs and what the future holds for the Bored Ape Yacht community.

New Investor Tips

These new investor tips help to answer questions most new investors ask when they first start investing.

How Much Cash Should I Have in My Portfolio?

You should not have any cash in your investment portfolio. Cash is a depreciating asset and its better to hold bonds, precious metals, or safe ETFs during market sell-offs.

Who Buys Stocks When Everyone is Selling?

When everyone is selling stocks, market makers, traders, and long term investors are on the other side buying at lower prices.

Is it Worth Buying Less Than One Share?

Buying less than one share is worth it. Fractional shares help retail investors jump into investing. But it's important to know what you lose when you buy fractional shares.

Should I Buy Red or Green Stocks?

You should never buy stocks just because they are green or red. Let's explain why stocks are colored this way and why they should not effect you investment decision.

OK, but . . .

Market Commentary

Best NFT Marketplaces to Buy or Sell Your NFTs

NFTs are still causing quite the stir in the Crypto Industry as Bored Ape Yacht has decided to launch its own Token and its DAO. The NFT marketplace can make or break your art.

News Dominates the Markets

market commentary

James Leveque’s Keys to Financial Freedom

Some tips and tricks that helped me in the financial game.

What is the Purpose of StockBossUp BossCoin?

What is this cryptocurrency called BossCoin? Why is it integrated in StockBossUp? BossCoin's purpose is to incentivize a flow of responsible and wealth-generating investment ideas on the StockBossUp network.

My pension fund is dropping

Practical tips to consider in times of economic downturn

Updates to StockBossUp

StockBossUp is adding new features as we leverage our new BossCoin boost and integrate live data into the app.

Resources for Publishers
Resources for New Investors
Boosted with BossCoin