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You should avoid them to protect your assets.
When it comes to the stock market, nothing is guaranteed. Nobody knows whether it’s going up, down or sideways. But one thing is for sure, overtime, some people will make money and some will lose their hard earned cash.
Despite the market being unpredictable, there are certain moves that’ll just put your capital at risk. In fact, many investors have regretted making these mistakes over the years.
To protect your investment, and boost your chances of reaching your financial goals, here are 4 things you shouldn’t do, when investing in the stock market.
Due diligence is a fundamental part of investing. Not doing it is like building a house on a shaky foundation. This explains Why many investors panic at the slightest sign of trouble in the stock market.
Doing your research is particularly crucial, if you choose to invest in individual stocks, instead of a diversified fund. This is because investing in individual stocks is typically riskier.
If you want to sleep well at night, make sure you have a strong conviction in whatever you’re investing in; and you build this confidence, by doing your due diligence.
Investing the money you need in the short term is one of the biggest mistakes you can make as an investor. This is because it can put you in a position where you have to make a very difficult decision.
Like everyone else, you don’t know when the next market crash will be or how long it will last. As a result, you shouldn’t rely on your investment to fund a financial emergency or cover recurring expenses.
Imagine planning to pay your rent or mortgage with your investment, and suddenly, your portfolio gets cut in half! If market sentiment doesn’t change soon enough; unfortunately, you might have to sell some or all of your assets at a loss.
Thankfully, you can avoid this risk and save yourself the headache by only investing for the long term.
There are two emotions often displayed by investors — fear and greed. Fear during a market downturn and greed during a bull run. People who have no control over their emotions tend to panic sell during a market crash and FOMO their life savings into the market during a bull run.
Interestingly, a market crash can be a buying opportunity, while investing when stock prices are at all time highs, means you’re likely to overpay — even for quality stocks. This of course eats into your gains or increases the risk of a loss.
Emotional investing is clearly not the way to go. It’s in fact, a key reason why many investors have lost money repeatedly — despite the S&P 500 returning an annual average of 10% over the years.
Due to increasing access to trading platforms, tracking your investment has never been easier.
However, constantly doing this is where the problem lies. Sometimes, the volatility in the stock market can be quite dramatic, resulting in huge upward or downward movements within a short period of time.
Watching this in real time can be scary and can make you tweak your portfolio too often than necessary. This makes you highly likely to make decisions that could hurt you financially, in the long term.
Meanwhile, it’s important to keep an eye on the wider economy, but it’s in your best interest not to do it too often.
We know there’s no foolproof strategy when it comes to the stock market. However, making reckless moves as an investor is nothing else but self-sabotage.
Some common investing mistakes are:
- Ignoring due diligence
- Investing the money you need in the short term
- Not able to control your emotion, and
- Constantly checking your portfolio
By avoiding these mistakes, you’ll not only be protecting your hard earned money, you’ll also be boosting your chances of reaching your financial goals.
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