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The main mistake of newbie investors

The main mistake of newbie investors

Today, the sphere of trading is quite attractive for many people, because if you are a competent investor, you will be able not only to passively earn some part of your income, but also, multiplying capital, completely switch to this type of activity. Interested in such an attractive opportunity, many begin their way of the investor completely versed in the intricacies of this craft and make a typical mistake beginners. What is this mistake and how to avoid it - we understand in this material.

 

The main mistake of each beginner, from which, in principle, grow all the others - it is an excessive risk. Indeed, many Dummies, inspired by the "Wolf of Wall Street", try to increase their capital in the shortest possible time and use the exchange not as a tool to achieve financial well-being, but as another way to buy a lottery ticket or bet. Of course, there is a very small chance that they will be able to correctly predict the rise or fall of the share price once correctly, based on their intuition, but at a distance it is impossible to earn so, because constantly predicting the unpredictable is simply unrealistic.

 

Try not to make that mistake. First of all, try to find opportunities in which the income will be practically guaranteed, as in the case of blue-chip shares or government bonds and invest in them the bulk of your initial capital.

 

By the way, such securities make up 50 to 100 percent of the portfolio of a competent investor, and the rest is already filled with riskier investments. And the rest of the portfolio consists of shares of companies of the second third and so on echelons, and the riskiest occupy only a couple of percent.

 

Beginners often act the other way around and try to earn first of all on these most risky securities and invest in them the bulk of their capital, if not the whole. This is an unjustified risk, because in such a way you need to invest only a small part of the already received income from your investment, so that even in the event of a bad outcome to continue to go into plus. This is the basic strategy of many successful traders, allowing them to increase their capital year after year.

 

But what about the story that Warren Buffett or another investing guru bought almost for nothing shares of any company, and it then took off and earned him several thousand percent of the income? This is true, but this security was invested, most likely a couple of percent of the capital. Imagine you have 100 conditional units, 97 of them you have invested in low-risk stocks that allow you to turn inflation-adjusted these 97 conditional units into 102. Even if the remaining 3 conditional units you lose, you remain in the plus, but if you manage to find a gold mine, then even these 3 percent of the portfolio will be enough to earn a fairly round sum.

05.05.2021
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