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Let’s talk about Investment Mistakes! My eyes cannot believe how many mistakes we do when buying in the stock market today. When I just started investing, I made a lot of these mistakes for sure. Maybe, I am still doing some of them. However, now I try to pay more attention. This list compiles a few of the investment mistakes I did when I just started my investment journey and I would like to share it with all of you. Let’s find out!
Disclaimer: This list is made of what I believe are some of the worse mistakes all of us make when investing in the stock market. Nevertheless, rest assure there are many more!
This is a list of the main investing mistakes done by me:
- Don’t believe in getting rich in no time. Be aware of those false gurus. I mean, one in a million can be lucky, but honestly, how long will luck last for?
- Do not use your emergency fund or money you will need in the short/ medium term to invest. Investments can fluctuate. However, the longer the time your money is invested in the stock market, the higher the probability that you will be profitable. After a stock market crash, the longer period your money is in the stock market, the higher the chances you have to recover and make a profit from it.
- Don’t sell your position just because the price went down. Please don’t do this! The noise you are getting from the market is greater when you take a shorter time frame. If the fundamentals of the company have not changed, there is no reason for you to sell stocks.
- All companies have their ups and downs. Take advantage when a company you know is having a rough time to buy a cheap stock and grow your position.
- Try Dollar Cost Average (DCA), when buying. This is a great strategy, so as not to use all your cash at the same time.
- The crisis are just temporarily, over time the economy is in expansion. Try buying at a crisis, because the good companies will grow.
- Do not follow a strategy you do not feel comfortable with. Why do trading if you don’t want to spend all the time following the stock price? Why Dividend Growth Investment (DGI) if you are looking for growing stocks? And so on. Choose your strategy and follow it.
- If any of the companies you own change their fundamentals or the business is deteriorating with time, the best is to sell that stock and not lose the opportunity cost to invest in a better company.
- Before following a stock recommendation from someone else, think about the strategy this person has and the one you follow. Maybe theirs are not the same, and can be counter productive.
- Do not mistakenly confuse stock price with stock value. Stock price is the current cost of a stock. However, stock value (market value) is the real value of the company (fundamental analysis).
- If a stock is overvalued and the stock price goes higher, now the stock is more overvalued. It is better to let pass a “good” opportunity rather buying an overvalued stock.
If you still didn’t get it, here you can download the excel file I use to keep track of my investments. You just need to make a copy of the file and it is all yours, I hope you give it a good use, same as I do!
You should always remember:
- The shorter the time frame, the greater the noise
- The richer person is the one that needs the less. Do not become mad about money and do not try to earn it in shady ways.
Why am I investing?
I invest in order not to lose purchasing power. Also, no one can be sure if we are getting a decent retirement pension (or a shitty one), so go on and invest your money! Start slowly, but know that compound interest and time are on your side! I wrote about dividends and retirement pension in my previous post, if you’re interested in knowing a bit more.
What is the easiest way to invest?
If you do not want to spend time checking companies and analyzing their fundamentals, go and buy an ETF, the goal of an ETF is to replicate its index. You can also buy an index fund.
Here you can read about the basics of my portfolio and have some investment ideas from it.
And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossomAnaïs Nin
The above quote is about taking risks. All investments involve risks, and it is up to you to understand them and try to minimize them all.
Two important rules for me when investing are:
- Dollar Cost Average (DCA). In order to buy in the stock market today you should spread these purchases in different periods of time: a bit per month, every six month, every year, you choose. Do not be afraid of having liquidity, wait for the right investment opportunity.
- Do not time the market. This is very difficult to do so, and most likely you can guess, but you will never be 100% sure. One thing, I can mention is taking advantage when the stock falls.
Portfolio update: No new added stock, since the last week I bought 3 stocks: Howmet Aerospace – HWM, PPL Corp. – PPL and Simon Property Group – SPG, with a rather good size of my portfolio. Also, I sold NIO for more than double of what I have bought it for. I will let you know how it goes at the end of the month with my monthly summary post!
For my following entries, I will share with you the meaning of the different dividend dates, the dividends aristocrat, Indexes, how to safe money and much more. Stay tuned and follow the blog! and keep learning!
If you have time, check my other posts and let me know if you have done something similar.
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