Now that the stock market is in full swing and people all over Great Britain – young and old, experienced and inexperienced – are becoming more confident with their investing choices.
But it’s not only about diversifying your portfolio; you also need to make sure that you don’t make any costly mistakes when trading stocks.
The most common mistakes investors on the British Stock Exchange should avoid:
If you want to get rich quickly, this isn’t the right way to do it.
An essential factor for successful trading is discipline; if you can control yourself well enough to invest according to an achievable plan every month or every quarter, great.
But if you’re tempted by the latest hot tip and make impulsive decisions, you’re going to lose a lot of money.
As we mentioned earlier, one of the main reasons for owning stocks is diversification.
So it’s essential to diversify your portfolio within a particular sector and across different sectors.
You shouldn’t invest in just banks or energy companies because if there are problems with either, you’ll have all your eggs in one basket, which can lead to huge losses.
While every broker has their commission structures for trading stocks, they generally tend to charge between £5-£10 per trade.
It may seem insignificant at first but can quickly add up to hundreds of pounds per year when you consider how often you trade.
This advice may sound obvious but believe us when we say that many people who fail in their trading strategies do so because they think they’re able to guess where the market will be moving next.
Remember that no one knows what will happen next week or even tomorrow; if they claim otherwise, run the other way.
By trying to time the market, you’ll end up buying at high prices and selling at low ones.
Most brokers don’t charge commission on their fund trades; however, most do charge fees for trading stocks.
So you need to factor these extra costs into your plans before committing to any investments.
It will help to see the bigger picture and avoid short-sighted thinking where all you think about is making a quick buck at any cost.
There are no guarantees in the world of investing, so it’s important not to overestimate your knowledge or abilities when trading shares on the stock market.
So there you have some of the more common mistakes that amateur investors on the London Stock Exchange should avoid if they want to have any hope of long-term success.
Putting your money into several different stocks with no preset plan or strategy for selling them means you may not see any return on your investment anytime soon – if ever.
Not only that, but it allows outside factors such as human emotion (greed and fear) to adversely affect your portfolio much more heavily than if you had a preset plan.
The point is trading without a plan for selling your stocks will result in delayed returns or possible negative returns depending on how long you expect to hold onto them.
Being unable to control one’s emotion during financial transactions should be considered the primary reason investors fail, according to experts like Daniel Crosby, author of “The Laws of Wealth.”
However, it seems many still don’t heed this advice when trading stocks.
Fear, greed and other emotions can quickly affect your judgement and lead you to make rash decisions that will ultimately hurt your portfolio.
You should always know what your money is being invested in, for the most part at least.
This way, you will understand why your stocks are doing certain things and how to react if they go up or down significantly – without letting emotions get in the way, of course.
Learn more about share trading to be truly successful.