January 11, 2019

The 5 most common mistakes by new stock investors

Are you new to buying stocks? Then Obermatt CEO Dr. Hermann J. Stern wants to show you the 5 most common mistakes beginners make. Interestingly, all of them are caused by emotions.

Mistake 1: Buying when it looks good

There will always be things that are "in" – a fashion brand, an artist, a company. The problem with such trends: Others know they are "in" as well. Whenever you buy a stock that many other people are buying too, it will be expensive – in some cases even severely overpriced. That’s why you should exercise caution whenever a stock or an industry sounds very attractive. You can simply check the Obermatt value rank on obermatt.com, it will show you how much a stock is really worth.

Mistake 2: Selling when it looks bad

The same applies to selling: If the news say that a stock will drop in value, investors start to panic and sell shares they would be better off keeping. As a matter of fact, they should even buy more off, because whenever the price of a stock goes down, it can quickly become a bargain. Just like before: if many people give the same advice, it’s usually wrong.

Mistake 3: Spending all your money

New investors often get excited about the stock market and invest all the money for their portfolio within the first few days. The results are careless purchases and a lack of liquidity if prices drop. You should put money into your trading account on a regular basis, but always leave some of it there – for the times that others view as bad, but which are actually good for investors because stocks are cheaper.

Mistake 4: Selling all your stocks in a crash

The next stock market crash is coming. However, we’ve already survived quite a few crashes in the past. That means: If the stock market crashes, stay cool. It will recover. What won’t recover are your retirement savings if you sell all your shares at a time when everyone else is doing the same. It’s hard, but you should always follow the old rule: invest slowly, sell slowly.

Mistake 5: Putting all eggs in one basket

Anyone who discovers a promising industry is tempted to really go for it. Why buy one tech giant when you can buy three? Why only one cannabis producer instead of five? The problem is, what do you do if the industry collapses? In that case the value of your portfolio can quickly evaporate. That’s why you need to diversify – to invest in many different areas at the same time. Even if one of them temporarily crashes, it won’t hurt you too much. And remember: If the value of a stock drops, it’s a good reason to buy more.

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