Here are the mistakes that even longtime stock investors can make, according to personal finance site Gobankingrates.
Focus on a company or a company stocks
According to Gobankingrates, even experienced investors often especially love a certain company for personal reasons. That reason can be a fan of the company’s leadership, admire the operating philosophy, or love the company’s products.
The problem is that once you fall in love with a stock, it becomes extremely difficult to sell it. However, just because you love your smartphone doesn’t mean the company’s stock does not. That phone company is a good investment option, said Gobankingrates.
To avoid the risk of investing in a company or stock for emotional reasons, Gobankingrates advises investors to follow certain guidelines with their portfolios.
If a stock falls behind the general market or drags your portfolio down, it might be worth replacing it. In general, all stocks should be evaluated with the same criteria, Gobankingrates emphasized.
Hold the bad stocks
Several studies have shown that selling stocks is one of the hardest parts of investing in stocks, and selling is often much harder than buying.
While bad stocks sometimes recover, maybe for a long time, holding a stock based solely on hope often leads to more losses…
However, it is a fact that most investors, including experienced ones, expect a bad stock that is falling sharply in price to suddenly reverse. Instead of giving up on that stock, they kept waiting in hopes of at least breaking even.
According to Gobankingrates, there are two problems with this approach. First, there is often no evidence that the stock will recover. Second, by waiting for that stock to recover, investors may miss out on other potential opportunities.
While bad stocks sometimes recover, maybe for a long time, holding a stock based solely on hope often leads to more loss, notes Gobankingrates.
According to this site, to avoid the above situation, investors should consider the opportunities they might miss if they try to hold on to a losing investment and regularly reassess their portfolio objectively.
No investment plan
A common rule in investing is “Plan trade and trade according to plan. In other words, before investing in a stock, an investor should outline a plan for why he bought the stock, his profit goals, and how much he is willing to lose.
Besides planning, following the plan is equally important. Because even experienced investors sometimes trade according to their emotions without following the plan.
Portfolio less diversified
Many situations make an investor’s portfolio less diversified. For example, employees who hold stock in the company they work for often take on the risk of holding a single stock.
According to Gobankingrates, investors should build a portfolio that is sufficiently diversified that no single investment can send them into crisis when it plunges.
“This is extremely important. Even experienced investors cannot underestimate portfolio balance,” emphasized Gobankingrates.
Choose the right time
In 1994, the Nobel Prize-winning economist Paul Samuelson analyzed in the Journal of Portfolio Management that timing the market often is not often effective.
He believes that many investors are confident when trading based on a view of market performance. He advises investors not to make decisions based on general market indexes.
Calculate the average price
Price averaging is a “tact” many experienced investors use when a stock is falling deeply – by pouring in more money. Gobankingrates thinks that this “tact” is like “playing the lottery” because if the analysis is wrong, the situation will be worse.
Trade at the start of the session
According to Gobankingrates, the first half-hour of this trading session is usually the time of amateur investors. That’s when investors are scared to sell due to the negative news of the previous night or rush to buy based on the good news.
The market volatility at the moment is quite high because the orders placed before the market open are piling up at the same time, Gobankingrates pointed out.
Therefore, this site advises investors to calmly analyze the market before making a decision.
Not continuously update on market news
Many investors believe that once they understand the basics of stock investing, all they have to do is build a portfolio and let it run.
According to Gobankingrates, it is true that investors who trade less often get better results than those who trade regularly. However, even the strongest stocks sometimes “free fall,” and the market as a whole is constantly evolving.
In 1896, the Dow Jones Industrial Average had 12 stocks and these were all considered “blue-chip” stocks. However, so far, only 1 of those 12 stocks has survived, that is General Electric. And this stock is even in danger of being kicked out of the Dow Jones.
Therefore, Gobankingrates advises investors, even though they adhere to a long-term investment strategy, to regularly update market movements.