The individual investor often makes certain typical mistakes that will eventually
cause him to give up or to lose everything.
Believing every investment you make is 100% safe
Any investment implies a certain risk factor that is determined by a multitude
of factors. Disregarding these factors leads to wrongly evaluating the wining
possibilities.
Great expectations
Those investors that neglect risks also have great expectations regarding the
general profits. In this case disappointment will occur, maybe even sadness
or desperation when they lose the final investment also.
Not doing your homework
You must be as informed as possible about your investment, about its risks and
the credibility of the brokers and company administrators.
Not diversifying the portfolio
When we say investment portfolio, we mean all the investment a certain person
has made.
Through diversification the investor will attempt to cover through profits some
companies that might register losses. Regarding the optimal rapport between
winning and security, a portfolio will have a pyramidal distribution of the
stock types. The biggest investment will be done in companies with minimum risk
and maximum security like governmental bonds. Climbing the risk stair the number
of investments will decrease. Investments in extremely risky companies will
represent a low percentage of the portfolio.
Being greedy and/or being afraid
Greed never pushes to safe investment. Through greed you will only make investments
that don’t stand a chance. Fear will determine a rather calm and secure
behavior that won’t bring you losses but will cause you to flip over great
opportunities.
Investing because of a “tip”
An investment has to be done accordingly to the needs and risk tolerance of
every individual. These two elements are unique and like fingerprints are always
different, the same way there can’t be two persons with identical needs
and risk tolerance. So, if an investment is an opportunity for the one that
who told you the tip, it doesn’t mean it is for you too.
Not giving up on time
This is a mistake that can be hardly eliminated. It’s hard because the
market fluctuates anyway and investors can’t say when it’s just
a normal day or if the stock price is really going down. Many people won’t
admit they made a financial mistake and don’t want to give up their stocks.
It has been statistically proven that in these cases things go from bad to worse.
Avoiding such situations is difficult even for a pro who usually has more information
that the individual investor.
Investing only short term
Avoiding, or reducing this risk can be achieved by investing long term in profitable
stable companies. In these cases, bad yearly evolutions can be recovered through
better years.
Thinking you are the smartest
Every investor bases his decisions on information he knows at a certain moment.
Not wanting to hear advice or to hear new things, does not make you smarter,
it brings you a great disadvantage and you will only put on hazard with your
investments.