Five wrong investors' practices and how to avoid them
The most obvious clue to your investment strategy is that you are losing money. Any investment loss of more than 10% may be a signal that you have a problem. Believe or not – when it comes to investment losses – most of the time, our biggest enemy is our own. The following are five common mistakes for individual investors, as well as some tips to avoid or correct them.
Error # 1: Do not sell lost stock
One of the biggest mistakes investors made when managing their investment accounts was to lose their positions ahead of time. The reason investors lose the stock is usually psychological. For example, if you sell the stock after a loss, you may blame yourself for not selling it.
In order to keep your loss small, you need a plan before you buy your first stock. A rule of thumb is to remember that if you lose more than 10% of any investment, consider selling it. When you buy a stock, you can set a stop order below 10% of the price, or you can record it over time. The main thing is that you should take action when your stock is losing money. Even if the company looks fundamentally strong, if the stock is falling (the reason may not appear immediately), consider using 10% of the rules.
Error # 2: Allow the stock to become a loser
For many investors, it seems they can not win when they sell. For example, if you sell stocks in order to get stock, you may feel that if you hold a little time you will have more money. On the other hand, if you invest a sterling profit only to see its value down, you no doubt feel helpless to stop the loss and suffer from the market fickle way. When faced with this painful situation, some investors may hold hope that their favorite stock will eventually rebound to the previous highs.
If you have a winning stock, you might think it is too early to go crazy. That's why you might want to use the incremental method to sell the winner. For example, if your stock rises more than 30%, consider selling your 30% position. By selling your part of the proceeds, you meet the double feelings of fear and greed – and perhaps more importantly – you do not let your portfolio become inadequate or overweight in any positive role to keep your portfolio properly balanced Asset Type
Error # 3: Get Emotions About Stock Options
Unable to control their emotions is the main reason why most people make mistakes when investing. In fact, the investment decision is too emotional is a clue that you can lose on track.
A common problem, especially those who are successful in the market is overconfidence. While some self-confidence is necessary, if you want to invest in the market, let your self-hinder your investment decisions the way is a dangerous thing. The most profitable traders and investors are reluctant to buy their stock.
Error # 4: Investing only one or two stocks
One problem with direct investment in the stock market is that most people There is not enough money to maintain an appropriately diversified portfolio. (Generally speaking, no stock should account for more than 10% of your portfolio.) While diversification limits your upside, but it also protects you if one of your investments is not good. If you can not afford one or two stocks, you have a few options.
Error 5: Unexpected Expectation
Before you enter the market, you should be ready, do not be afraid. Although you should always hope the best, what should you prepare for? The biggest mistake that many investors have made is that their stock will not fall. It is investors who are blind because of sudden market collapse, bear market expansion, recession, deflation, or any other unexpected event that could have a negative impact on the market
Although a little fear makes you Toes, too much fear may lead you to miss the investment opportunities. It is fear of loss, preventing many people from buying at the bottom, and losing high profits, preventing people from fearing too late before selling. Often, fear is due to lack of information. That's why it is important to work with trusted financial advisors to create plans based on information and knowledge rather than emotions.
There is no guarantee that the techniques and strategies discussed will suit all individuals or will produce positive results. The general risks inherent in stock investment include market prices and dividend volatility, principal losses, selling market prices may be greater or lower than initial costs and potential liquidity in investment markets
This article is compiled by Standard & Poor's Financial Communications , Not for any individual to provide specific investment advice or recommendations. If you have any questions, please contact your financial adviser
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