The investment market is like the roller coaster ride where you have to sit back holding your seat and wait for the ride to stop to get down. You cannot jump in the middle of the ride. Investment is all about taking a calculated risk. To this, here are the 7 biggest mistake Investors make.
1) Failure to understand the Base Rate:
People follow a trend of going by the information that is being projected from the outside. The result is that they never follow the classic way to proceed with the investment process that is checking the current and historical details of the company and the stock market. Based on the information, it is important to analyze how it is going to work for you and how it has worked for any company in history.
2) Fail to understand that investment needs analysis and skills
Modeling the outcome statistics is important but if you fail to do so, you will bring the failure. Nothing is luck-based, you need to have the relevant skills to win the situation. And for that analyzing the investment sectors according to their growth rate is very important.
3) Overconfidence
People model the future outcome so confidently that they sit back and relax to eat the ripe fruits. But if you are not prepared for the outcomes, your life will change in just a moment. Do not allow your emotions or gut feeling to rule the risky process of investment. Rather be prepared for all sort of possible outcomes based on the probability.
4) Relying too much on Short investment turnover
Turnovers are not for adding value, they are shorthand for valuation. It is true that shorthand saves us a lot of time but they come with a blind spot that is definitely not worth taking a risk with huge investment. Understanding the value and limitations of the turnover will help a lot.
5) Failure to Compare
Comparing the past growth and success rate of the area you are thinking to invest will bring more insights for you. The investment area needs to be compared effectively with all the possible favorable and unfavorable outer conditions.
6) Wants everything too fast
Lack of patience can degrade your health as well as your investment. Stock market deviates with full speed in short span of time but is too risky to rely on that. Realizing and understanding the historical average return of any sector or company will help.
7) Waiting for one more decrease or increase in the value
Too much waiting for buying or selling your stock in the hope that a loser stock will give you greater benefit is a foolish way of thinking. You might relate to this quote that “Something is Better than Nothing”. By waiting you can lose an opportunity to turn your loser stock into some return value. Because of your excessive waiting your loser stock becomes worthless and you are left with not even something.
