That dreaded value trap is just one of the trading mistakes that can keep you from achieving financial freedom
Slick Bucks | July 18, 2017 | SmallCapPower: Are you fond of trading? In the world of business, making mistakes is part of a person’s learning curve; the more that you make trading mistakes, the better you become at what you do.
However, business owners sometimes fail to include common sense, thus leading them to make mistakes. Remember, an investor with common sense will be able to reach success faster, as compared to those who completely overlook the importance of this simple strategy.
Of course, not everyone will be gifted with this mindset, but knowing a thing or two about some of the most common investing errors will help prevent yourself from going down this path of loss in the long run.
Here are some of the most common trading mistakes that you should become aware of.
Failure to plan
Have you heard of a business that succeeds without proper planning?
Maybe not – it is pretty obvious that if you do not know what to do, you can fail very quickly. So, how do you fix this?
First, start off with preparing a personal policy or plan that addresses your objectives and goals. Identify what it is that you are trying to achieve. Are you trying to earn for your child’s education or are you planning for your retirement?
Take note that trying to defeat the market is not a proper investment goal. For you to come up with better goals, you must first ask yourself questions like, what risks will you encounter? How will you fix it?
No matter what you come up with, always make sure that these are meaningful goals and objectives that will not hurt the progress of your investment. Always remember that it must always adhere to a long-term policy, even when market trends and conditions can become unstable.
Purchasing stocks that look cheap
When it comes to investments, this mistake happens a lot and those who often commit this, do so by comparing the 52 weeks high of the stock with the current share prices. For a lot of investors who use this method, they assume that a drop in stock price signifies a good buy.
But you should take note that the fact the company’s price has become 30% higher than that of last year, will not help it gain more income this year. This is why analyzing the reason behind why the stocks have fallen, makes for a good strategy to avoid mistakes.
In short, you just have to avoid buying stocks that look enticing to the eyes because the price is low.
There will always be a significant reason for why the price dropped, sometimes it can be because the CEO resigned and the competition increased, but do not take this as a negative thing, because it can also be a real reason behind why the stock will not rise anytime soon.
Take note that it will be better to invest in firms that will experience constant growth in the long run.
Do not underestimate your capability
Yes, it can become very intimidating at times, but that doesn’t mean that you have to beat yourself up.
A lot of investors make the mistake of believing that they can never excel in this kind of activity because success is only for those who are more skilled and tenured.
If you are one of those people, stop now!
If you want to succeed, it’s as simple as taking the time to learn and research. Individuals who are always prepared and can include common sense in their decisions (as mentioned above), will without a doubt earn more.
If you take note of all of these tips, you do not have to worry about mistakes ever again. You can now feel secure with your money and reach the financial freedom that you have been longing for.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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