8 Mistakes Investors make when buying long term stocks (Part 2)
---->These are the common mistakes investors make, I have to admit that I have also fell victim into some of these mistakes, thus I am writing this to spread awareness to my followers to not make this common mistakes that many investors make. In the future I will make a video on this to explain more in detail because if I were to discuss this in words it would take a long time to read, so look forward to it! <----- br="">
5) Using margin to buy stock when you don’t have enough cash in your bank account
- Margin is like borrowing money to buy stocks, it can be a double edge sword, some people use it to make sure they have enough cash in liquid just in cash they need it but some don’t have money to pay off the margin then they end up paying so much interest and also one day being forced to sell all their shares at a huge loss if they don’t have enough cash in their margin account. This is amongst the worst decision an investor can make as it can either make or break a person, it can even cause them to go bankrupt.
6) Buying too few or too many different stocks
- An example of having too few stocks is like only having 1 or 2 stocks that is taking up 100% of your portfolio, to be honest I am also guilty of it, eventhough you believe in the stock so much you should now hold only 1 or 2 stocks in your portfolio, we should be diversified. Just to mention holding too little or too many isn’t really critical but its not really healthy for your portfolio in the long run and you should practice how to balance your portfolio based on the risk to reward ratio.
- Holding on average of 5 to 8 stocks in your portfolio is technically ideal. Too many stocks in your portfolio is also bad because for example: its like having too many children, you are unable to focus on all of them because at one point we would have no time to spend for all of them and we might just ignore some of them. We should treat all stocks in our portfolio like our own children, we want them to grow and receive the equal amount of attention so that they can grow up healthy and bear fruits.
7) Putting in too much money in a single stock all in 1 go
- Not practicing the art of “average down” can be a hard thing, especially when you “accidentally” add one more 0 when buying a stock which happened to me and the stock went down a lot. After spending so much money for 1 stock then when the stock plunged I had no more money to average down and I was left to no choice but to just hold the stock for “long term” then when I had the money to average down I couldn’t buy enough to significantly bring down my average price which made it even harder to profit out of that stock. For those who understands me you can comment down below
8) Thinking that investing is hard and looking at financials is hard then give up
- People with different background especially those non accounting background may suffer reading each company’s financials especially me as an IT background. But it is not impossible though the time we need to spend learning about this may take a much longer time but trust me “IT IS WORTH IT”. Don’t be discouraged at what people may think of you when you learn slower or don’t even know what is price to earnings ratio, trust me I have been there. It takes time to learn this skill but when you are good at it, it will come natural and you will look at your past self and think “hmm I’ve come a long way and I am now officially a good investor” If I had given up a long time ago I wouldn’t be talking to you guys here today, honestly there were so many times my friends look down on me but that never made me give up on my dreams. So for those who think that investing is not for you and you feel like giving up after looking at financial statements, remember that I am with you and I have also gone through what any non financial background people have gone through so don’t get discouraged.
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