Some Mistakes in Stock Investing You Should Avoid

Some Mistakes in Stock Investing You Should Avoid – Stock is a type of investment with high risk and high return. The scale of risk comparison for both losses and benefits is not much different. In addition, the tendency to fall and increase the value of shares can no longer change in a matter of days or even in a matter of hours. However, the temptation of the lure of profits that can be given in playing stocks, sometimes makes people who are less careful and ultimately fail in investing in stocks. For those of you who want to start investing in stocks, it’s a good idea to learn from the mistakes of previous investors. Here are eleven big stock investor mistakes you need to avoid.

1. Only Sticking to One Stock

Only fixating on one stock is very dangerous because it makes stock investors irrational in valuing their shares. When an investor has fallen in love with a stock, he also tends to ignore the bad things about his favorite stock, only wanting to hear the good things (confirmation bias). Use stocks as a medium or tool that can lead you to your financial goals, but don’t get too hung up on them because in the end you will release the shares to meet your financial goals.

2. Don’t Understand Fundamentals

The company’s fundamentals should be the fundamental analysis in making a decision to buy a stock. Unfortunately, many investors prefer to see a momentary trend in technical analysis. The desire to make quick profits in the capital market makes stock investors tend to ignore the company’s fundamentals. Even though the company’s profit and loss that triggers stock prices is very dependent on the company’s fundamentals. You can imagine the risks that threaten investors if the fundamentals are ignored.

3. Easily Desperate

Owning stock means owning a small percentage of a business. Stock investment can also be analogous to doing business. You also have to be prepared with the risks, namely uncertainty. That is, you must be prepared not only when you get a profit, but also be prepared to risk the loss. Successful entrepreneurs must have experienced ups and downs in running their business, as well as stock investors. When you as a beginner stock investor make a mistake in investing, don’t give up easily and leave the market. Learn from these failures and improve the way you invest so that you can become a smart investor with a steel mentality.

4. Stuck in cheap stocks, even though they have no potential

It is a law of business, an investor wants to get a low price and sell when the price is high. The world of stocks is no exception. Unfortunately, many novice investors misunderstand this investment strategy by taking stock at a low price but in fact the stock comes from a bad company. The thing that encourages novice investors to buy shares at low prices is because of limited capital. Many novice investors buy lots of small value stocks in the hope of making a lot of profit, even though this kind of investment tends to be detrimental.

Your return on investment does not depend on how many shares you hold, but on the future of the company whose shares are in your hands. You can get a greater opportunity to make a profit if you buy a few superior shares instead of buying thousands of dime shares.

5. Stuck in Risky Short-Term Transactions

Short-term transactions (short selling) is indeed tempting. You can imagine if you have a large capital in just a few minutes you can reap millions of rupiah in profits with a system like this. But in truth, transactions like this are very time-consuming, energy and emotional. Beyond that, the risks that threaten are also relatively large. Prices that fluctuate rapidly require the ability of experienced stock investors and can control emotions to make transactions at the right time. Reaching profit in a short time with this kind of transaction model will be very risky. Indeed, for maximum results, the stock market almost always produces positive returns in the long term, namely in the range of three years or more.

6. Afraid to buy stocks when the market is down

Economic conditions move cyclically, sometimes up and sometimes down. When the economy is good, the stock market is excited and raises stock prices up (bullish). Investors also prefer to buy stocks when the market is bullish. Conversely, when the economy worsens, the stock market will be sluggish, and investors will be pessimistic. This will also affect the stock price, so its value will fall (bearish). If we look closely, a bear market offers an investment opportunity to buy good stocks at low prices.

For example, in early 2016, coal commodity stocks were under pressure until their value was far below their equity. When the economy improves, and the price of coal rises again, these stocks also rise again according to their fair price. For smart stock investors, this is a great opportunity.

7. No Matter Portfolio

There are incidents of investors who buy a company and deliberately leave it for the long term and after a few years the company is big and the stock is profitable. At first glance this kind of investment is profitable, but in fact it is not a good way to invest. No matter how many stock portfolios you have, you have to monitor them regularly. The goal is that if the company’s shares are performing better, then you can add to your portfolio so that the profit potential is better and if the shares go down you are not too late to make the decision to sell them.

8. Too Afraid to Lose

Too bold and too afraid to lose in stock investments are just as dangerous. One of the wrong habits of stock investors is that they like to withdraw small profits, but they are often reluctant to bear losses by cutting losses on stocks that are ‘sinking’. Unfortunately, when the stock price drops drastically, the investor continues to hold the falling stock regardless of the fundamentals in the hope that the price will rise again. Actions like this actually make investors lose even more.

9. It’s easy to get carried away in a panic situation

Panic selling is an event that occurs because investors panicked about falling stock prices. In the panic selling phenomenon, investors want to immediately release their shares regardless of the price, for fear that the price will fall further. These actions are triggered by emotions and fears rather than rational analysis. Avoid selling stocks because you are carried away by panic. Analyze the stock you want to sell, whether fundamentally the stock is still worth holding on to. Remember! Owning a good stock is like owning a small part of a good, bona fide company. Why should you sell it at such a low price?

10. Wrong Market Entry

The stock market is very sensitive to conditions other than those included by the media, it can go up or down drastically. Often market panic breeds overpriced or underpriced stock prices. Ideally, the share price should be proportional to the total capital and earnings prospects of a company. The act of buying shares when the market is bullish, makes investors trapped in buying overpriced shares. Often these investors are too optimistic and expect prices to continue to climb. On the other hand, in a bear market, investors turn pessimistic and try to sell stocks when they should be trying to buy.

Successful stock investors always base their investments on the intrinsic value of stocks and pursue cheap stocks on that basis. They will buy shares of companies with strong fundamentals when the price in the market goes down, then sell them only when the price is higher. The key is not to take extreme decisions when market conditions are bullish (very volatile).

11. Wrongly Follow Stock Tips

Technology makes it easier for us to communicate, one of which is sharing tips on buying and selling stocks. But unfortunately, not all tips come from trusted sources. After all, it is impossible to predict 100% of investment in success or failure. Also understand that big names alone do not guarantee the future of a company. A good stock investor has good emotional stability so it is not easy to accept tips or advice from unclear sources, without doing an analysis first.

In investing in stocks, no one can fully guarantee success. In addition to requiring sufficient knowledge for company fundamental analysis and diligently observing macroeconomic conditions in order to be able to buy and sell shares at the right time. Another key to success is to avoid some of the mistakes that stock investors often make, such as the review above. There are 4 things to pay attention to