Investing in equities is said to be one of the most effective ways to establish and grow a long-term fund. However, like any other transaction in the financial markets, it involves risks that could cost you your life savings. Knowing what to do is simply not enough. You must also know what not to do. In order to make sure that you indeed last long enough to be called a long-term investor, we’ve asked experts and veterans what they think are the things to avoid so you can survive the stock market.
Investing in Risky High-fliers
One common mistake that traders make is betting on risky high-fliers. This is a common fault of the rookie trader who wants likes to hope. They hope a hyped company will do well. They hope that a company that once boost in the market will do a repeat and win them substantial profits. They hope things will go their way with only hope as the fuel. This is wrong in so many levels. The danger in investing on high-fliers is that most of them are overvalued stocks. What traders need to invest in are companies that have proven their worth time and again. This will take a longer time but it will also take lesser risk and thus a greater chance at growing your long-term investments.
Going For Instinct Versus Research
According to research, more traders use their instincts in trading mostly by going with what the majority of the market is doing. While using your instinct is not against the law, it is not exactly a good habit. Going with the crowd is not a recommended move as well because it can make you more vulnerable to losses. The best thing that you can do as a trader is research. Really, it’s the best and only thing that can absolutely increase your chances of profit. Don’t go with your gut feeling or with the crowd, go with what the numbers tell you. While there is no exact science to stock trading, there are certain patterns and profit opportunities that are best seen under an analytic scope. So go ahead, use your instinct and consider the move of the many but always remember, it will always be your research and strategies in and out the market that will make you rich.
Wanting Instant Profits
Long-term investors are called as such because they can do what others are finding hard to withstand: waiting. Not to discredit the advantages of short-term investing but day trading is significantly riskier and more suited for veterans and experts. Engaging in day trading will, more often than not, derail your long-term returns. Furthermore, day-trading involves a much more fast-paced environment with severely more trades. In fact, you’ll need a supercomputer that can measure trading speeds at the rate of picoseconds or a trillionth of a second. In short, it is highly discouraged especially for individuals, new traders, and long-term investors.