Looking to invest in stocks? Avoid these three mistakes

Mistakes are a part of the investing process. We can't tackle them without committing them.

In Summary

• Many investors find to make many mistakes while playing the stock market, ending up buying or selling the wrong shares or doing so at the wrong time.

• Such Mistakes are common in the stock market knowing them can turn you into a more effective trader.

An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE
An investor looks at the digital board at the Nairobi Stock Exchange(NSE)/FILE

Stocks, which enable someone own shares in the desired company, are traded on stock/securities exchanges.

Many investors find to make many mistakes while playing the stock market, ending up buying or selling the wrong shares or doing so at the wrong time.

Such Mistakes are common in the stock market knowing them can turn you into a more effective trader.

Here are the three mistakes often made by stock traders. 

Action plan: There is always a plan behind every investment. An investor should clearly understand the ground realities of investment. For instance, what happens if things don't go according to plan? Most investors never think about the outcomes and thus ruin their investing career before it even starts. The best way to deal with this problem is to seek a reliable financial planner or seek to understand the pros and cons of the stock market. For example, if you are looking for how to buy Apple products, a proper series of actions must be followed carefully.

A paucity of patience: Patience and discipline are virtues that will benefit the traders but they are the most common qualities most investors lack. Actually, patience enables an investor to calculate but not speculate. When someone doesn't display patience, he will want to make the profit every which way and that leads to disaster. Sometimes you need to hold your nerves while investing in a stock, which means an investor should keep his or her expectation realistic. Lack of patience leads to a high turnover of investments, which is another reason for destruction because the transaction costs can wipe out the little profits. 

Understanding the Investment

Understanding investment is the most important thing for traders. As the world's most successful investor, Warren Buffett has a saying that be cautious against investing in companies whose models are not being understood by an investor. The best way to overcome this is to build a comprehensive portfolio of mutual funds. So the ultimate advice is that if you want to invest in stocks, make sure you should know about the stuff and understand the companies you are buying into.

Anyway, mistakes are a part of the investing process. We can't tackle them without committing them. If you handle these mistakes well, you become a good investor, because solutions to these mistakes improve your investing skills.