Top Investing Mistakes

Investors can sometimes be their own worst enemy, so what are some of the mistakes that investors make?  Here we outline our top four.

1.  Panic selling

When the market drops severely, it is tempting to sell.  Before you do, ask yourself if some part of your investment thesis has changed (e.g. you invested in a company that is now being sued), if so then you should consider selling.  If nothing has changed, and your stock is simply down because of market noise, then you may be better off holding on to your stocks.

Investing is a long-term game, if you are investing for the long-term you can ignore short-term market ups and downs.

Loss Aversion

Just like selling in a panic is bad, holding on to a loser for too long is also bad.  In both cases you are allowing emotions to dictate your investment decisions.

Prior to making an investment, have a downward price limit in mind, once it hits this sell, unless there are some very good reasons for holding on to a stock (e.g. an impending takeover / buy out).

In the share market, like in life, you win some you lose some.  Cut your losses and move on.

Overly Frequent Trading

The fundamental thesis of points 1 and 2 are to have an investment strategy and stick with it.  Following a strategy will ensure that you make rational investment decisions and avoid overly frequent trading.

Trading too often is expensive and will impact your returns.  Studies have shown the impact of excessive trading on a portfolio:

Professional investors have a strategy, and trade only when new information comes to light that changes the strategy.  Novice investors trade in and out frequently, with no rationale, and 99% lose money.

Concentrated Portfolio

One common mistake that novice investors make is to hold only a handful of stocks.  This is a very risky strategy and one that is unlikely to perform well in the long-run.

In future posts we’ll go into more detail about constructing an investment portfolio the right way.

The information on this website is for general information purposes only. It is not intended as  financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product. Balance Impact does not recommend or endorse products and does not receive remuneration based upon investment or other decisions by our email recipients, publications, newsletter or website users.

Top Investing Mistakes

Top Investing Mistakes

Investors can sometimes be their own worst enemy, so what are some of the mistakes that investors make?  Here we outline our top four.

1.  Panic selling

When the market drops severely, it is tempting to sell.  Before you do, ask yourself if some part of your investment thesis has changed (e.g. you invested in a company that is now being sued), if so then you should consider selling.  If nothing has changed, and your stock is simply down because of market noise, then you may be better off holding on to your stocks.

Investing is a long-term game, if you are investing for the long-term you can ignore short-term market ups and downs.

Loss Aversion

Just like selling in a panic is bad, holding on to a loser for too long is also bad.  In both cases you are allowing emotions to dictate your investment decisions.

Prior to making an investment, have a downward price limit in mind, once it hits this sell, unless there are some very good reasons for holding on to a stock (e.g. an impending takeover / buy out).

In the share market, like in life, you win some you lose some.  Cut your losses and move on.

Overly Frequent Trading

The fundamental thesis of points 1 and 2 are to have an investment strategy and stick with it.  Following a strategy will ensure that you make rational investment decisions and avoid overly frequent trading.

Trading too often is expensive and will impact your returns.  Studies have shown the impact of excessive trading on a portfolio:

Professional investors have a strategy, and trade only when new information comes to light that changes the strategy.  Novice investors trade in and out frequently, with no rationale, and 99% lose money.

Concentrated Portfolio

One common mistake that novice investors make is to hold only a handful of stocks.  This is a very risky strategy and one that is unlikely to perform well in the long-run.

In future posts we’ll go into more detail about constructing an investment portfolio the right way.

The information on this website is for general information purposes only. It is not intended as  financial or investment advice and should not be construed or relied on as such. Before making any commitment of a financial nature you should seek advice from a qualified financial or investment adviser. No material contained within this website should be construed or relied upon as providing recommendations in relation to any financial product. Balance Impact does not recommend or endorse products and does not receive remuneration based upon investment or other decisions by our email recipients, publications, newsletter or website users.

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