They say prevention is the best cure, and the same theory applies for steering clear of rookie investment errors. Know what doesn’t work to help you achieve what does; understanding what commonly trips up investors is a great way to avoid the same mistakes from happening to you.
1. Trying to bottom pick ‘cheap’ investments
Invest in stocks using a trading system that has been fully researched with provable returns. Avoid the temptation to buy shares that appear to be priced low. Over-indulging in perceived ‘cheap’ stocks in bulk is a sure fire way to create a minor disaster for your investment portfolio. Shares are often sold off for a bargain price for more than one reason, such as a CEO resignation or the rising of competition. Upward momentum must be sustained and provable with all risks effectively managed before you make a purchase.
2. Underestimating your abilities
Learn to back yourself and believe in your own abilities. Invest in any provable trading system so you can buy and sell consistently and decisively. This is the way the most successful investors achieve optimal performance, so it is wise to follow their lead. Learn from the past mistakes, research findings and teaching of those more experienced so that you are well positioned for success.
3. Not creating a plan
An investment strategy is the ideal way to outline your goals and track your success. Lay out a plan to address your objectives, benchmarks, and the risks involved and how you will approach them. A personalised plan will help you stay on track to successfully meet the targets you set, as well as show any problems that may need addressing within your investing habits. A common strategy amongst successful investors is mapping out how, when and why they are investing, which is a great way to stretch your mind to a long term goal. If you would like a free copy of a trading plan template please contact us.
4. Losing sight of the bigger picture
Avoid the hype associated with news reports of the ‘pick’ or ‘flavour of the month’. These stocks can go out of fashion as quickly as they went in so instead invest your money into shares that have provided an entry signal from a provable trading system. Don’t impulse purchase or buy based on emotion or subjectivity. Invest or trade in a mechanical manner for consistent long-term returns.
Contact Share Wealth Systems on 03 9585 0300 to take advantage of our 20 years of experience so we can guide you towards achieving success in the share market.