How To Fix 4 of The BIGGEST Mistakes Newbie Investors Make
Here are four easy-to-understand tips that will save you tons of money:
In an ever-evolving world where making enough money has become more worrisome than ever, investing is a great place to best set you up for long-term financial freedom. But, it also comes with its own difficulties and uncertainties.
So, is it really worth it? Absolutely!
If you’re just starting out, it is helpful to keep these next few tips in mind when making decisions regarding your personal stock market portfolio. I wished I had known these tips when I was first starting out, and now I will be sharing them with you!
Let’s get started. Here are 4 common mistakes newbie investors tend to make:
- As soon as the market drops, you sell everything you own.
How often do you find yourself worried that all the money you put in the stock market will one day disappear because of a stock market drop?
Don’t worry, you aren’t the only one.
But, here’s the thing: the stock market is a volatile place; however, that doesn’t mean you always have to hold your breath. Here are a few things stated by Tony Robbins in his book Unshakeable — Your Financial Freedom Playbook:
When a market falls by at least 10% from its peak, it’s called a correction.
When a market falls by at least 20% from its peak, it’s called a bear market.
On average, corrections have occurred once a year since 1900, and bear markets every 3–5 years
Now for the relieving part:
Every single bear market in US history has been followed by a bull market, without exception.
Guess what? This proves true even after the 2008/2009 market crash. In fact, over the next 12 months after the crash, the S&P 500 index grew by 69.5%!!!!!!
Incredible!
What this means for you is that you should be expecting the ups and downs of the stock market, that’s just inevitable. But, if you pull out your money as soon as it drops a few percentages, and wait until you reinvest, you would have evaded the incredible returns that came following this dip.
2. You think you’re going to make “fast money”.
If you need to make a quick $5,000 to pay for a vacation A.S.A.P, using the stock market as a beginner is not the place to do it. When you invest your money, you might not receive positive returns right away. There truly is no way to tell!
Although this will depend on your age, the stock market is amazing when it comes to long-term goals, because you can expect long-term growth within the stock market. Let me repeat that: long term. Again, I’m not saying it is impossible to receive quick money with the stock market if you are experienced, but if you aren’t experienced enough yet, it’s better not to expect a quick return.
3. You think that “buy low, sell high” is the end all be all.
Let’s be honest, who hasn’t heard this saying! I definitely have, especially when I started out. But, when push comes to shove, is this the best rule to follow to get your best returns in the stock market? HELL NO!
Here’s why: When a stock falls in price respective to where it was a day ago, a week ago, or even a month ago, and you feel like the price is in your range and want to go ahead and buy it, ask yourself why. Just because the price of the stock is low, who’s saying it’s going to go back up again? It is always worth checking why this particular stock is falling in price, and whether it can be attributed to a market correction, or whether it is caused by something directly related to the company itself, such as a scandal, or bankruptcy. In that case, you’ll be throwing your hard-earned money down the drain and expecting it to come back out. It most likely won’t.
4. You trust other people’s advice.
NEVER TAKE ONE PERSON’S ADVICE WHEN IT COMES TO YOUR MONEY. Every stock market expert I’ve researched, every book I’ve read and podcasts I’ve listened to regarding money advice will tell you not to take one person’s advice and run with it. You have to do your own research, look at many different sources, recognize your personal money goals, and make the best decision for YOU. No one can give you advice that would work best for you, and no one can guess every outcome of the stock market, either.
This article is not intended to be professional advice for personal financial choices. I do not claim to be a professional in any of the above-mentioned financial fields. I am simply sharing what has worked for me, and a summation of what I have learned in the past few years of my personal investing journey.