4 Common Investment Mistakes Stock Market Investors Make

There are many people interested in pursuing alternative investment strategies to begin the New Year. They want to explore their options, which is great if they apply a holistic approach to investing. Generally though, many investors focus on the short term gains, leading them down a road of missteps, and financial loss. Since the risks are high when it comes to investing, no one beginning their investment career wants to make the same mistakes others have made in the past.

The following are four stock market investing mistakes (in no particular order), which continue to cost seasoned-investors their money:

Investing Emotionally, Instead of Utilizing a Sound Investment Strategy

It is easy to fall in love with a stock if it has performed so well for you in the past. When you compare the historical gains to negative reviews from stock analysis, many people find it difficult to let a past performer go. Believe it or not, there are some wealth managers who have fallen into this trap, which is why they can confidently advise you to sell. Do not hold on to stocks because you like the CEO’s potential or what the company is doing within their community; it is an investment mistake. Instead, research performance metrics over many years, profit ratios, the company’s trajectory, and other stock analysis for the stock to determine whether the stock is a keeper.

Waiting for a Losing Stock to Bottom Out

If a stock is not performing then you should sell it. It is impossible for you to make up lost ground from a stock that is dropping in value. There is no way you can recoup the losses you experience, and if the stock suddenly turned around, the gains may not adequately offset the losses. Investors can avoid this mistake by starting their investment strategy with a sound plan that will help them recognize the early warning signs of an underperforming stock.

Investing with a Short Term Horizon

There are people who can make a sizable living in day trading, but the learning curve is steep, and not for everyone. As a result, many people invest based on faulty performance indicators and make far less money than the average returns. Investors should develop an investing strategy that extends beyond their immediate financial needs, one that does not make them stock stalkers, watching the ebbs and flows of the stock market and stressing over it.

Misunderstanding Trends and Performance Indicators

There are many stock managers who do not know how to predict accurately what a stock is going to do, yet they have years of experience under their belt. So, it is safe to say that novice investors won’t always have all the answers when it comes to making sound investments, even if they watch the market constantly. They can misinterpret data and forget to assess the intrinsic value of the company they are planning to invest. It is better to have a sound investment strategy with a long term goal than simply managing your stocks based on the latest news being reported on television.

Investing is a great plan for growing wealth, but it must be done correctly in order to succeed. That’s why we run each alternative investment strategy through a rigorous certification process to highlight it’s pros and cons before we recommend them. Learn more about the alternative investment strategies we offer to see if they’re a right fit for you.