7 Beginner Investing Mistakes to AVOID

Welcome back to the channel. I'm Suzanne from Arvabelle and in this video we'll go over 7 of the most common

mistakes

beginner

investors make. If you haven't seen the latest collaboration video I made with Alyssa and Kevin, be sure to check it out and head over to their Adventures and Us channel to see a video I made about five

mistakes

I made when I was first getting into

investing

. If you're not already subscribed to this channel, be sure to hit the subscribe button and hit the like button and we'll get right to number 7, which would be thinking that

investing

is way over your head.

So ladies, I'm talking to you because this is one of the things that bothers me the most every time I mention something about the stock market or investing. One of the most common responses I get is "OMG, that's way over my head." "I think you don't need an MBA or a finance degree or a business degree to learn how to invest, and you don't need a financial advisor. Now, if you're just totally uncomfortable with this and don't like the idea of ​​investing at all So yes, definitely talk to a financial advisor and ask them to help you.

But in general, if you take the time to learn about the stock market, you will be totally capable of investing on your own if you accumulate all the time you spend. If you spend a week watching TV watching videos on YouTube or watching Hulu or Netflix or whatever and instead spend that time for a week learning about the stock market, I guarantee you would be much better off than where you were and as if you weren't It was rocket science. Mistake number 6 is not paying off debt before you start investing. So, for most people, simply because the interest rates on the debt they have are too high and the return they would get in the market. value is lower, it makes more sense to pay off the debt before them. start investing money.

And you have to calculate those numbers yourself and I'm not a financial advisor and everyone has a different situation, but generally speaking, just because of the interest rates and your rate of return, it will make more sense to address your debt first. So number five is do your homework. You may have been able to get away with it in school, but when you're investing, you have to do your research and do due diligence on the things you're investing in, otherwise you're going to lose. If you get pretty burned as a

beginner

or even an experienced investor, you will need to continually research the companies you are investing in, otherwise it is very easy to get caught up in a bad trade if you don't necessarily understand what you are doing. what you are investing in or why you are investing in it.

You need to understand investing and understand the numbers behind companies, ETFs, mutual funds, or whatever you're investing in. You need to understand the numbers behind that if you simply have no idea what numbers you are supposed to look at. I'm going to link to one of my other stock market videos on the cards that goes over some of the different numbers you should look at when you're trying to pick a stock. Mistake number 4 is letting others influence you and you will probably have to constantly work on this one, even if you are an experienced investor, simply because it is so easy to let the opinions of others influence our own decisions.

Picking stocks based on what the media says, what people say on TV, or what your coworkers, family, or friends say is generally not a very good idea. And especially if everyone on social media is talking about a particular stock or a particular thing, do your due diligence and make sure you spend your money and invest it in something you personally believe in and would choose to invest in anyway . . Don't invest in something just because everyone else is doing it. I don't know if any of you remember the whole bit connect scandal from a year or two ago, but that's what I'm talking about.

Don't invest in something just because everyone else is doing it. You have to do your own research on this. Also, while we're on this topic, be very careful about buying stock tips and buying courses. There are some that are very legitimate, but there are also many scams. Especially in these courses that are like learning how to day trade with no money down and make $2 million tomorrow! That? Also beware of the newsletter and stock tips that say this former trader is back after 10 years and blah blah blah okay cool. So with any of these things, first make sure the person selling this is really credible and knows what he's doing.

So see if you can find them online, see if you can find legit reviews of their programs and also check to see if they have free content if they don't have free content where you can see their trading or investing style and see if that aligns with your own trading goals. and investment; If it's not available to you, don't buy it because you don't know what you're getting into. What often happens with these stock newsletters is that the person sending them has already gotten a good price, at the price they want, and when they actually write their newsletter, they send it. , it comes to you, you open it, you read it, you go and log into your brokerage account, and you go and try to buy the stock, at which point the price has probably changed quite significantly, it really hasn't.

I care because they are already inside. But if you enter and then the price starts to drop a little bit or you know it just doesn't go as planned, the person sending the newsletter has probably made a profit and therefore it will be like we just made $3,000 with it! This is what I suggested! When in reality you could have made a little money or you could have lost money, but the bottom line in all of this is that if you don't understand why you are buying a stock, don't do it. Whether it was suggested by a friend or co-worker or suggested by some "professional" who gives stock advice, if you don't understand it, don't invest in it.

So mistake number three is letting emotions get the better of you. So the stock market, actually intraday prices, are driven almost exclusively by fear and greed, and it doesn't matter whether it's real people or computerized. Everyone wants to win as much as they can and wants to lose as little as possible. And when you try to win a lot and lose too little, you are dealing with a balance between fear and greed. So if you're investing for the long term, it's important not to spend too much time analyzing your portfolio over a time period that doesn't really matter.

So what I mean by this is if you're buying, for example, if you're buying like Amazon and you want to keep it for 20 years, you don't really need to check your portfolio every day or like multiple times a day. You don't need to do that because anything you do in a short period of time today won't have a big impact on what you do over that 20-year period that you want to hold those stocks. You shouldn't panic or make rash decisions based on what's happening in a period of time that doesn't really matter in the big picture.

Obviously, you want to

avoid

panic selling and you want to

avoid

buying a stock because you're afraid of missing out. Another aspect of this is that you don't want to fall in love with the stocks you're investing in. So sometimes, if an investment just doesn't work out at all and something goes terribly wrong or just isn't the right thing to do, sometimes you'll need to cut your losses, so it's important to be realistic about the things you're investing in. If you are in love with a company you have invested in because you believe it will be the next big thing, but all the numbers, reports and improvements or lack thereof indicate otherwise, then you need to be able to recognize this and be able to cut your losses.

Mistake number two is wasting money. There are so many different ways you can waste money when investing. First, choose an account that is appropriate for your individual situation and needs. So, for example, a Roth IRA allows your investments to grow tax-free, while something like a 401k could potentially match it, and if you don't contribute to that, then you're literally passing up free money. Another way people waste money is by not reinvesting dividends. Later in life, if you try to live off dividend income or simply use dividends as an additional source of income, that's fine. But while you're young, reinvesting dividends only makes your account grow faster, so it really doesn't make much sense to me why people choose not to reinvest their dividends.

Some other ways people waste money are by withdrawing it from retirement accounts too early and also buying and selling an unnecessary number of times within a year and taxing those as short-term gains instead of long-term gains. And again, I am NOT a financial advisor, but trading on margin is generally not a good idea, especially if you are a beginner, just keep it simple and invest only with the money you have because what happens if you are borrowing money and trading on margin It's that if something goes wrong you still owe that money. So don't waste money like that.

Trade only with what you have. And finally, many times people pay too much for commissions or pay too many fees to have a financial advisor or some type of mutual fund. There are a lot of fees associated with different things when you are investing, which is why today there are platforms like M1 Finance and Robinhood that allow you to invest without paying commissions. And it makes it very easy to get started with very little money. Now, sometimes it is definitely worth paying commissions, especially if you are, for example, a day trader who needs the TD Ameritrade Think or Swim platform;

You need that platform and therefore you don't really care if there is a $7 commission. And many times, if you are a very active trader, you can call the brokerages and reduce your commissions a little bit. It really depends on what you need, but for a beginner just starting out, starting with something like M1 Finance is a great idea. So sometimes financial advisors can be very expensive when in reality you can do a lot of the same things on your own and sometimes things like mutual funds will have a really high expense ratio so it's always a good idea to check the ratio. of expenses in different mutual funds or index funds or ETFs that you are investing in and make sure that ratio is not too high because those small amounts can really start to add up.

And the number 1 mistake is trying to time the market. So I think one of the most important things is to have some kind of trading plan when making any investment or transaction. So what I mean by this is is this a short term trade? Is it a long term trade? How long are you going to put up with this? What is the time horizon for when you want to profit from this? Are you trying to maintain this for a month? For an hour? Forever? What is your plan? Many beginner investors simply completely ignore their risk tolerance and when they see a stock go up or down too much, they simply throw their time horizon out the window and forget what their trading plan was.

And again, this just goes back to the need to do your research and have some sort of plan, especially in the event that we get into a recession or depression, you don't want to panic sell and you don't want to be FOMOing on other stocks either. Patience is a virtue my friend, you have to be patient with the stock market. Don't chase performance and don't automatically assume that a stock will behave the way you want. If you are constantly entering and exiting positions because you think you have it figured out, chances are you won't end up beating the market.

If you want to learn about the mistakes I made when I first started investing, be sure to check out the latest video and visit Adventures and Us to watch it there. If you enjoyed this video, remember to hit the like button, subscribe to the channel and I'll see you in the next video.