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Serious Investment Errors to Avoid

Jan 30, 2008
The ideology of the stock investment is to gain a lot of money. So do not lose money is the popular mantra in the world of stock investment. It sounds very nice but no one can predict about the stock investments. The investors confront with high risks involved while investing and trading in stock market. Sometimes, even seasoned investors suffer heavy loss in stock investment. However, the investor can minimize the risk of loss and access great profits in stock investments by avoiding the following general errors.

General Errors:

Never Buy Unknown Stocks: The investors are viable to owe a great risk by buying share, which they do not understand. Never haste to buy shares that brought, profit to the neighbor or colleagues. It is ridiculous and unwise decision to do such things.

The investors need to understand the business structure and financial record of the company prior to purchase of stocks. Even successful companies with excellent business structure suffer from horrible devaluation if any of its sectors fail.

De-emotionalize with Stocks: Emotional attachment with stocks can suffer the stock investment. It tempts to hold the stock even when the financial situation persuades to sell them off. No doubt, the investors want to prove that they had made perfect decision in finding the ideal company by spending enormous time and effort going through the pages of corporate information and stock reports.

However, this sheer emotional attitude can bring heavy loss to the investor. The stocks are to make money, not to marry them. If the stocks are consistently low and there is no chance of improvement in the move then it is appropriate to sell them even though it hurts.

Great Risk Involvement: No matter, the investors are willing to take all risks but on the other hand, it is essential that they do not end up without a penny. Their needs to be diversification while buying the shares. In planning a stock portfolio, get shares from all dominant sectors such as financial, building, oil, industry, and services.
This helps the investors to avoid their whole investment from going down the drain in a case any one-sector collapse. It is best to limit an investment up to 10 % of the investor's portfolio.

Eye on Turnover Overload: Stock market is not an impulsive business. Buying and selling the stocks after a short period with small or no gains helps the broker to get rich with commissions that they get while trading. Investors take a note that each transaction comes with contract costs and taxes.

By not taking these things seriously, the investors are viable to swipe out by the costs accompanying the high turnover. In the long run, there is a possibility to miss out the gains of the stock investment.

Learn while Investing:

Understanding the potential errors in stock investment is a step ahead for investors. There are numerous pitfalls, which the investors are going to stumble up on while trading. The essential part of the stock investment is to learn while moving along. No doubt, even billionaire investors are bound to make mistakes.
About the Author
Scott Johns conducts analysis of stock market picks for a penny stock analysis company. To check out Penny Stocks for some of his company's latest picks.
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