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5 Common Stock Investment Mistakes and How to Avoid Them

Are you new to the stock market and just getting started with stock investments? Good for you. The stock market has given great gains to many who have invested in it.

Anyone who invested $10,000 in the stock market 50 years ago would have $380,000 right now. That’s a great return on investment.

But that’s only if you don’t make the stock investment mistakes mentioned below. Read on to learn more.

1. Don’t Invest Money You Need in the Short-Term

If you are investing money that you might need in the short term, you are forgetting about the power of compound interest.

Once you invest your money into the stock market, try to leave it in the market for as long as possible. Think long-term investments! Do not remove it unless it’s an absolute emergency. The longer you can let compound interest work its magic, the better off your investments will be.

2. Diversify as Much as Possible

Are you investing only in one particular industry (perhaps technology) or in one particular kind of investment (maybe ETFs)? Either way, remember that the first rule of stock investment strategy is to diversify, diversify, diversify.

This way if a particular industry or section of the market goes down immensely, it won’t affect your portfolio as much.

Can you imagine what would happen if your entire portfolio was focused on the tech industry and the technology bubble burst like it did in the 2000s?

You would lose it all like many people did who were overly focused on the tech industry in their investments.

3. Get Advice From Expert Investors

Are you unsure of what stocks you should be investing in? Research different companies that can send you their stock picks, so you don’t have to spend time researching this yourself.

This way you can still be in the market, but not have to spend hours per week researching what your options for stocks should be.

4. Ignore the Ups and Downs

Are you checking your long-term investments every day? Stop doing that to yourself! It’s akin to torture to see the daily ups and downs and feel like you are the worst stock market investor in the world.

Check your portfolio maybe once a month, if that. Trust that in the long-term your investments are going to go up and stop fiddling around with it too much. You could make a bad situation worse by doing that.

5. Stick to Blue-Chip Companies Rather Than One-Offs

It might be tempting to invest your money into penny stocks or IPOs that promise a 1000% gain in one week, but these investments are usually fool-hardy and only for experienced investors.

For a beginner like you, it’s better to pick the best of the best, that is, the companies that have been around forever and that have proven themselves to be solid investments. These are also known as blue-chip companies.

Avoid These Stock Investment Mistakes

You might be thinking that these stock investment mistakes mentioned above seem too simplistic, and you want more. But as a newbie investor, avoiding the five mistakes above would be a big leap ahead.

As you become more experienced and learn more about the stock market, you can build upon this.

Enjoyed this article? Keep learning by visiting the other investment-related articles on our website.