It is not natural for investors trading in the stock market to make mistakes from time to time. An environment where everyone made money and was happy could only exist in fairy tales. In particular, it is inevitable that investors who have no experience in financial markets, yet try to trade actively, will sooner or later step on the board.
People often tend to learn from their negative experiences. Of course, when it comes to investment, it should be accepted that these negative experiences will come at a cost. At this point, Tolstoy’s words come to mind: Learn from the mistakes of others. One does not live long enough to make all the mistakes oneself.
We can talk about dozens of things that need to be done to be a successful investor. However, in today’s article, we wanted to discuss the do’s and don’ts. In the rest of the article, we will examine the situations that are frequently repeated by investors and cause them to lose money. We hope that these items will remain as “mistakes made by others” and you will enjoy your profitable investments.
Here are 6 mistakes that are frequently repeated by investors in the stock market:
1- Investing Without Knowledge
Before investing in a stock, all aspects of that asset and the company behind it must be studied. It would even be wise to combine it with fundamental and technical analysis. Investing in the stocks of a company that operates in a business line of which you have no idea and that you have no knowledge of is almost gambling with your capital. Many investors who experience this situation cannot predict when they should turn their shares into cash, even if they make money by chance; they remain vulnerable to the possibility of a reversal of the trend in the markets. Investing without knowledge often loses money and is the first big mistake of investors trading in the stock market.
Make investment decisions as a result of your own research, not hearsay.
2- Having Unrealistic Expectations
The stock markets are full of people who dream of getting rich quick and easy. Investors who act with unrealistic expectations of gains often lose money. Especially after the use of social media has become so widespread among investors, we unfortunately observe that the dosage of information pollution in the markets has increased. We often witness that people, who are not under any legal responsibility, direct investor candidates to certain instruments with so-called hearsay news and manipulate them.
Keep your expectations reasonable when investing in a financial asset in the stock market. Examine past performance and price movements of similar products. Before trading, set a target for yourself and when your target is met, take profit by closing at least part of your position.
3- Investing with the Money You Will Need in the Short Term
Investing or seeing the results of your investment is inherently a process job. It is extremely inconvenient that the capital you use while investing consists of money that you need to withdraw after a short time. Investing with borrowed money, taking out loans and investing pushes people to behave in irrational ways. While the price movements in the markets can turn into a test even for ordinary investors, risking money that does not belong to you will complicate this exam. If you have invested with money that you need to use in the short term, your risk threshold will decrease. In order to compensate for a small loss you have suffered, you can open a number of different transactions in panic and incur deeper losses.
Regardless of whether it is a large or small amount, the capital you intend to invest should be money you are willing to forget in the medium to long term. Invest with your savings. Let your aim be to protect your savings first and then increase it. The way to win is not to lose.
4- Putting All the Eggs in the Same Basket
Investors can be extremely aggressive when they see an opportunity to make a profit. It may seem very logical to you to take a buy or sell action as a result of a news flow or technical analysis signal about a financial asset. But investing your capital in a single asset is extremely risky. The scenario in which you win can be very enjoyable. But in the event that things go wrong, you will have no room to move if your investments are in a single asset.
When investing, it is wise to consider your capital in chunks. Including instruments with different characteristics in your investment portfolio (making a basket) will reduce your risk. Each investor’s expectations and risk threshold are different; Therefore, investors should create a suitable basket for themselves.
For example, investors with a high risk tolerance and willingness to invest aggressively can diversify as little as 10% of their portfolio with high-yield investment strategies that have become popular in recent years, such as binary options trading. Investment strategies with high ROI often involve high risk. If you want to add some adrenaline to your trading career, you may want to reach more information on binary options on this website before deciding your high-yield investment methods.
5- Being Impatient
Investing in financial markets requires patience. If you invested after good research, you may need some time to reap the benefits. Panic buying and selling often causes you to lose money. Staying cool is the most positive trait an investor can have while your capital is collapsing before your eyes, or vice versa, melting like sun-drenched ice.
The market cycle is very important for the return on your investments. If there is a bull season and your investments are increasing day by day, you can increase your gains by being as patient as possible. Investors who do not analyze the situation well and act impatiently sell by consenting to a lower return. As the market continues to rise, the regret of impatient traders increases and they come under the pressure to buy again over time. Purchases made from this point, that is, the last stages of an uptrend, usually lose money to the investor.
If you are caught in the opposite direction of the market, you have several options. You can accept your loss and return to cash, reduce your cost by buying at a lower price after selling, or wait for another market cycle where you can profit by keeping your investments long-term.
Whatever you do, avoid opening trades in a panic.
6- Acting With Emotions
While investing, emotions should not be mixed into the business. This is of course not easy. Most investors begin to have positive feelings towards the financial instruments they invest in or the companies whose stocks they buy. Because they want to think that they have made a successful investment and that they will make money. Of course, they will be proud of themselves as a result. While this is an extremely human condition, it often results in harm. Scientifically, it has been proven that people insist on the correctness of their own decisions. Because otherwise they would be contradicting themselves. The way to be a good investor is to file these feelings and human attitudes as much as possible.
Do not have a fondness for the companies whose stocks you buy or the financial assets you invest in. Keep in mind that your goal is only to make money.