Investing in the stock market is one of the best ways to grow your money. But you have to keep in mind that it is also the “riskiest“. Don’t do these 5 mistakes many people make when they are investing in the stock market.
5 mistakes when investing in the stock market
1. Investing without a goal
Many people just dive in into investing in the stock market part without setting up their goal first.
A goal or target is very important when you invest.
Because you cannot go to a destination without knowing that destination first.
What’s the reason why you’re investing in the stock market?
Why you’re buying that stock?
Why you’re selling it now? Etc. etc.
Those are some of the questions you need to answer. In short, know your goal first.
Analyze yourself and you’re situation what are your investing goals. List them down.
Then evaluate if investing in the stock market is really the investing tool you need to use to achieve those financial goals.
Here’s a tip on how to set S.M.A.R.T financial goals.
2. Investing without emergency fund
Another mistake people make when investing in the stock market is not having emergency fund built first.
That’s a big NO NO.
What is emergency fund anyway?
In a nutshell, emergency fund is a cash or savings you have (which can be accessed immediately anytime) in case “life emergencies” happen.
Now, when we say life emergencies, we’re talking about hospitalization, job loss, calamity etc. etc. Those situation that you don’t expect to happen that can affect your finances.
It is ideal to have at least 3-6 months worth of your monthly expenses as emergency fund.
So in case of job loss, calamity or loss of income, you can sustain and maintain your lifestyle while looking to generate new income again.
Why it is important to have emergency fund before investing in the stock market?
Because stock market investment is the most volatile investment out there. Meaning, it goes up and down every time. There are hundreds of reasons, internally and externally.
It’s not ideal to pull out your money when the market is down just because you have emergency. You could lose them all.
So again, setup emergency fund first.
3. Investing from hype
This mistake is common nowadays. Many invested in the stock market just because of hype.
What is hype?
It’s just a “super promotion” of the stock market investing or a certain stock itself even without basis.
Examples are “invest in the stock market and you’ll earn 20% a year” or “invest in the stock market and you’ll become rich right away” or “buy stock xxx, it will fly next week” or “sell stock xxx it will go down more” and more and more and more.
Familiar with this lines? These are hypes.
Getaway with them. I mean, without knowing “why“, you shouldn’t be following those advice or else you’ll be eat alive by the market.
Again, it boils down from your investment goal.
Why you’re investing in the stock market or why you’re buying or selling that stock?
All your actions should be aligned with your investment goals.
4. Investing without patience
While investing in the stock market gives higher return than other investments on average, it takes time to see the results.
It can take years and years of “disciplined investing” before you reap what you sow.
Another mistake people do especially beginners are losing patience on their stock market investment.
Patience is a virtue. And in investing in the stock market, it is needed.
It will be one of your greatest ally in your investing journey.
Set your investment goals and follow them patiently.
Let your investment grow.
Focus on your life and the things you love.
5. Not investing on their selves
Another and biggest mistake many people do when investing in the stock market is to not invest in their selves.
They do not want to study, learn and educate their selves about stock market or about investing itself.
You don’t need to remember and memorize the whole system but just getting to know the basics and fundamentals are really helpful.
Read related books and magazines. Read blogs and watch videos. Attend seminars. Get a mentor and more.
There are so many ways way you can do to increase your knowledge especially these days where you can leverage the technology for your learning.
By educating yourself with what you’re venturing to, you can make smart decisions on how you’ll invest your money.
You’ll not be carried by those “hypes” because you know what you’re doing.
You can identify “investment scam“.
You cannot be fooled.
These are just 5 mistakes many people do when investing in the stock market or maybe in other investments too. If you’re doing any of these, you still have time to make the change.
Remember that investing in yourself is the best investment of all time.
Do you have something to add? Let me know your thoughts on the comment section below.
I hope this has been informative, cheers!