Technology has made the world of investment more accessible than ever before. Now, if you have an internet connection and a bank account, you can start trading within a week. If you’re a business owner, or you simply have enough excess capital, then you might be planning your first steps into the world of investment. If so, then read this first! Here are some of the worst mistakes you can make in investment.
One of the worst mistakes you can make is starting trading without preparing for it. The central principle of investing is buying low and selling high. Sounds easy right? However, once you start trading yourself, you’ll discover there are far more factors which need consideration. Understanding what “high” and “low” means in investing isn’t as easy as it sounds either. The markets you’ll be dealing in hinge on countless metrics and ratios, and how they’re interpreted. A price that seems high to the seller will have to be low enough for the buyer to take an interest in. this is just one of the ways differing conclusions are made from the same data. Make sure you know a little about trading before you spend any money. Books, blogs, and coaches like Elizabeth Goldman can all be handy.
Another big mistake is investing in what we call “penny stocks”. This might seem like a strange piece of advice at first. By investing just £100, you’ll be able to hold dozens of shares compared to blue chips, which will cost considerably more. True, you’ll get more stocks for less money with penny stocks. However, this doesn’t always make up for the volatility they have. Sure, penny stocks skyrocket in value all the time. However, they can also crash with equal speed and abruptness. Compared to blue chip stocks, it can be incredibly difficult to find dependable information on penny stocks too. Although you stand to lose less, penny stocks are generally a poor choice for a new investor.
Finally, don’t give too much value to rumours and news. If you spend enough time around traders, you’ll hear the phrase “the new Apple”. This refers to a rumour that could make a lot of people rich, or a revolutionary new company breaking into the market. Yes, some rumours have made people billionaires in seconds. However, investing on rumours alone is an incredibly poor move for new investors. After that, you’re locked into a roulette spin. You might get lucky, and get huge returns, and stick in the habit. Another possibility is that you act on the rumour too late, or invest based on worthless hearsay. If you get a tip that seems airtight, then follow it by all means. However, you shouldn’t lean on them too much when you first start investing. For your very first investments, try to stick to companies you know well or have experience working with.
I know that investing is an exciting prospect, but don’t get into a rush! It’s always best to start of small, and only risk the money you’re prepared to lose.