4 Deadly Reasons Why Beginners Fail in the Stock Market

Too many inexperienced investors end up losing money when they enter the stock market because they make some very basic mistakes. If you are considering putting some money into stocks then there are four things that you should learn to avoid.

Firstly, many people decide to buy without knowing how to choose which stock to invest in. They often rely on tips from friends or something they have heard on the internet. This is rarely going to lead to good profits. The only people who have the sort of technology and expertise to make reasonably good predictions about stock prices are professional traders. As a beginner you are not going to be able to compete with them, but you will do better if you avoid jumping on the bandwagon based on advice from unreliable sources.

Once you have bought your stocks you will see them rise or fall. Whichever way your investment goes you can end up making a serious mistake. The second and third mistakes that beginners commonly make are not knowing when to give up on a stock that is losing them money, and not knowing when to get out of a stock that has been rising. Timing is everything. When a stock is going down many beginners leave it too late to get out of the trade. They let their stocks drop so low that they cannot afford to sell up, because they feel sure that things are about to get better. Others end up leaving their money in a stock that has been going up; confident that it is a safe bet, but end up seeing their profits disappear when the price suddenly crashes. Taking expert advice on when to sell is the best way to avoid these errors.

The fourth mistake is in selecting a range of stocks to build a sensible portfolio. It is not beneficial if every time one of your stocks goes up another one is losing you the same amount of money. Your portfolio should be carefully chosen, with stocks that complement each other. You should consider how well each of your different investments work with each other, and not just think about each stock individually. Some stocks will almost always move in the same direction, while others always seem to be going different ways. Some stocks are very stable and rarely experience much movement, while others are always shooting up and down. Some stocks shadow the market, while others appear to move independently of it.

The only way you can improve your chances is to support your lack of experience with he advice of a more experienced, reputable advisor. The large number of factors needing to be considered before buying a particular stock, or building a portfolio, can only be adequately understood with considerable effort and full time dedication. Likewise, knowing when to sell is a skill requiring experience to time it well. Overall, your best investment will be the time you take to choose your investment and/or stock advisor. Let the experts do what they do best.