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Stock Marketing and Investing Mistakes To Avoid

Aug 17, 2007
Investing in the stock market is probably one of the riskiest ventures you can delve into with your money. It is also one of the most profitable. So it is only normal that you may have reservations about actually trying your luck in the stock market.

There are two people that you need to find and make friends with to get started investing in the stock market. If you are a brand spanking new beginner then first find a friend that invests in stocks. Preferable you want to find someone you have known for a while and someone that you can trust as a friend. You can use your friend to bounce ideas off of and get help from. Also you want to find a good stockbroker to begin trading. You might ask your friend who he or she uses as a stockbroker. Later on once you have gotten your feet wet you will want to strike out on your own but have a safety net in place before doing that.

One of the worst stock moves you can make is with variable annuities using the premium of your insurance. A variable annuity is an insurance contract that allows you to invest your premium in mutual fund-like investments. This sounds good in paper, but if you look at it a little harder, you will find that they are bad investments in the long run for the following reason:

Some other things that you want to watch out for and be carefully when considering investing follow.

Tax cuts
Ordinary investments in stocks and mutual funds qualify for low capital gains treatments, thus smaller taxes. Your gains from investing your premium, on the other hand, get taxed as income as soon as you withdraw the money.

Early withdrawal penalties
Insurance plans are designed for retirement. Taking out money from your premium entails a certain amount of penalty from both the insurance company as well as the government. So if you withdraw your profits, you will be penalized.

Death benefit
If your stocks are down upon your death, your beneficiaries can get as much as the investments you put in. Unfortunately, if your stocks are up, they get taxed as a regular income.

Costs
Annuities with insurance features are actually more expensive than ordinary mutual funds. The more insurance features your annuity has, the more annual feels are heaped against it, which naturally eats up your profits.

Timing
There are specific times as well, when to and when to not make an investment. For example times of natural calamity may drive prices of stocks down but there are no insurance these would recover to make a good profit.

Of course investing money in the stock market is inherently risky and you will lose some money at some point in your stock investing career. It is natural and a part of the learning process. The important thing is don't give up and stop just because you have a lost a little money. Take the loss as a learning experience and move on. Now if you find all of your trades end up losing money then you might decide to take a different route. However by following the advice and tips above along with your own knowledge you will end up profitable int he long run.
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