Nobody’s perfect, that’s a fact. We all make mistakes every now and then. In stocks, however, some mistakes can have a lot of repercussions for the uninitiated. Don’t take us wrong – becoming an investor is one of the wisest and bravest decisions anyone can make, but you should at least arm yourself before you dive headlong into this battle.
At the very least, you should be aware enough when investing that you don’t commit these four big mistakes at the start of your career.
Most neophyte investors make the mistake of investing in a stock that has a very low price. Theoretically, buying low means you can buy more holdings of stock in anticipation of a rise in price from which you can gain profits. However, how a stock gains profits is more than just a theory – it is the end result of the movements of several factors.
The truth is, some companies have very low prices because something in its history has influenced investors to pull out their holdings from the stock. What’s important is that, if you’re interested in a stock because it’s cheap, better do your research on the stock’s history as well as current events to see if there’s a solid chance of the price going up soon.
While it’s a good idea to defer to experts and their opinions as to what stocks are ideal for investment, it’s another thing entirely to rely solely on tips from people you know in the stock trade for fueling you investment decisions.
That’s not to say that you don’t listen to tips. Again, research is the key. You can grab some suggestions from market experts and then take it from there. Find out if the stock really is worth investing. For example, does it have a new product getting ready to roll out that has the potential of earning the company some profits? That makes an ideal investment.
Let’s set the language here first. Margins are jargon for “capital financing.” In other words, capital that has been accumulated through debt. Of course, it’s unavoidable that you’d want to borrow some money because you’re confident that you can pay stuff off through future profits.
However, in a very speculative environment as stock trading, financing your investment solely through debt can get you in a bad spot real quickly. Not only will you be unable to realize your profits as you’re still paying the debt off, but any bad trade could potentially double your debt or losses.
This is more of a pep talk than anything technical. Don’t be afraid about getting into stock trading, whether you’re doing it for the long term or short-term (day trading). There are tools that can help you, and lots of training available for the ones who are interested in having a source of residual income.
Good luck on being a stock trader!
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