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Top 10 Investment Mistakes To Avoid In Stock Trading

Increase Your Odds To Getting Rich

8th  Nov 2012


The following are the top 10 investment mistakes you should avoid:

Investment Mistakes1) Historical Performance 

Focusing on past performance without knowing that good past performance is no guarantee of good future returns. Investors tend to believe that past performance is a good indicator of future performance. The fact is many companies after successive years of brilliant performance do experience financial woes too and turn into losers over a period of time.

2) Over Dependent On Statistics

Next, instead of past performance, some investors put in too much focus on Number-Based Analysis. Numbers are useful to identify strengths and weaknesses, or to compare various investment alternatives. However it cannot be over emphasized that numbers alone are not enough in determining an appropriate investment strategy.


3) All Eggs In One Basket

Putting all your money in a single investment hoping to make it big when your investment strikes ‘gold’ is another big no-no. Bear in mind the knife cuts both way. Should something go wrong, you will lose all your money too.

4) Short-sighted Gain

Another mistake is purchasing stocks before their ex-dividend date and sell  them  after the dividend is received. The point that is overlook here is, the company's share price would decline by about the same amount of the dividend on the ex-dividend date. This negate the gain you received and in addition to this, the dividends received will create a tax liability for you too.

5) Financial Not Ready

Jumping into investments before you are financially ready is another big mistake that many people make in their pursuit to get rich. To be successful in any type of investments, you should clear up your debts first before you attempt to dabble in investment.

6) Greed

Greed. This is one of the most common mistakes associated with trading stocks. When in a hurry to make quick money, one tends to overlook many basic fundamental rules and best practices of investment.

7) Failure To Plan

Investing without a plan keeps you in the dark over  the risks and returns associated with your investment. You will not be able to make informed decision on what to buy , when to buy and when to exit. It amount to jumping onto a ship without a rudder and hope it will bring you to your next port of call.

8) Deviation From Plan 

Having a plan and not following it is as good as failing to plan. When a plan is not followed, you  lose the advantage of the increase odds in making returns from your investments.

9) Not Having Clear Goals 

With clear and achievable goals and timelines, you can avoid the mistake of selling a valuable stock too quickly. It helps you stay focus and enable you to differentiate between ‘noise’ that looks like bad economic indicator and  the real economic disaster coming ahead.

10) Thinking You Know All 

Being overconfident. Learning is a never ending process. The weaknesses you know , you can choose to learn to overcome it and improve your investment skill. The real danger that can expose you to a potentially big risk is not knowing what you do not know.

 

 

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