Welcome back to the channel I'm Suzanne with Arvabelle and in this video we are
going to go over 7 of the most common mistakes the beginner investors
make. If you haven't already watched in the last collab video I did with Alyssa
and Kevin be sure that you go and watch that and head over to their channel
Adventures and Us to see a video that I did about five mistakes that I made when
I was first starting to invest. If you're not already subscribed to this channel
be sure to hit the subscribe button and hit the like button and we will get
right into number 7 which would be thinking that investing is way over your
head. So ladies I'm talking to you because this is one of my biggest pet
peeves whenever I bring up anything about the stock market or about
investing one of the most common responses that I get is "oh my gosh
that's just that's way over my head" I'm like you don't need an MBA or a
finance degree or a business degree to learn how to invest, and you don't need a
financial advisor. Now if you are just totally uncomfortable with it and you
don't like the idea of investing at all then yes go and definitely talk to a
financial advisor and have them help you out. But in general if you take some time
to learn about the stock market you are fully capable of investing by yourself.
If you accumulated all of the time that you spend in a week watching TV watching
videos on YouTube or watching Hulu or Netflix or whatever it is and you instead
put that time for one week towards learning about the stock market I
guarantee you that you would be much better off than where you were and like
it's not rocket science. Mistake number 6 is not paying off
debt before you actually start investing. So for most people simply because their
interest rates on the debt that they have is so high and the return that they
would be getting in the stock market is lower than that, it makes more sense to
actually pay off the debt that you have before you start putting money towards
investments. And you have to crunch those numbers yourself and I'm not a financial
adviser and everyone has a different situation but generally speaking just
because of like the interest rates and your rate of return it's going to make
more sense to address your debt first. So number five is
doing your homework now you may have been able to get away with this in
school but when you are investing you do have to do your research and do your due
diligence on the things that you are investing in otherwise you are going to
get burned pretty badly as a beginner or even as an experienced investor you will
have to continuously do research on the companies that you're investing in
otherwise it's super easy to get caught in a bad trade if you don't necessarily
understand what you're investing in or why you are investing in it. You have to
understand the investment and you need to understand the numbers behind the
companies or the ETFs or the mutual funds or whatever it is that you are
investing in. You need to understand the numbers behind that if you just have no
idea what numbers you are supposed to be looking at I will link to one of my
other stock market videos up in the cards that kind of goes over some of the
different numbers that you should be looking at when you are trying to pick a
stock. Mistake number 4 is letting others influence you and this is likely
going to be one that you will constantly have to work at even if you are an
experienced investor simply because it's so easy to let others opinions influence
our own decisions. Choosing stocks based on what the media is saying what people
on the TV are saying or what your co-workers or your family or your
friends are saying is generally not a very good idea. And especially if
everyone on social media is talking about one particular stock or one
particular thing do your due diligence and make sure that you are spending your
money and investing your money in something that you personally believe in
and that you would choose to invest in anyways. Don't invest in something just
because everyone else is. I don't know if any of you remember the whole bit
connect scandal a year or two ago but that's what I'm talking about. Don't
invest in something just because everyone else is. You have to do your own
research on it. Also while we're on this subject be very very careful about
buying stock tips and about buying courses. There are some out there that
are very legitimate, but there are also a lot of scams. Especially on these courses
that are like learn to day trade no money down and make $2 million
tomorrow! What? Also be careful with the newsletter and stock tip things that are
like this ex trader is back after 10 years and blah blah blah it's like okay
great. So with either of these things first make sure that the person selling
this is actually credible and actually like knows what they're doing.
So see if you can find them online see if you can find legitimate reviews of
their programs and also check to see if they have any free content if they do
not have free content where you can see their trading style or investing style
and see if that lines up with your own trading and investing goals - if that is
not available to you then don't buy it because you don't know what you are
getting into. What often happens with these stock tip newsletter things is
that the person who is sending them out has already gotten in at a good price, at
a price that they want, and by the time that they actually type up their
newsletter, they send it out, it gets to you, you open it, you read it, you go and
you log in to your brokerage account, and you go and try to buy the stock, by
that time the price has probably changed quite significantly they don't really
care because they're already in. But if you get in and then the price starts
dropping a little bit or you know it just doesn't go as planned,
the person is sending out the newsletter probably has made a profit and so
they'll be like look we just made $3,000 on this thing that I
suggested! When in reality you could have made like a little bit of money or you
could have lost money, but the bottom line of all of this is that if you do
not understand why you are buying a stock don't do it. Whether that is
because a friend or a co-worker suggested it or because some
"professional" that's giving out stock tips suggested it, if you do not
understand it do not invest in it. So mistake number three is letting emotions
get the best of you. So the stock market, really the intraday prices are
driven almost entirely by fear and greed - and whether that's actual people or
computerized doesn't matter. Everyone wants to make as much as they can and
they want to lose as little as possible. And when you were trying to
make a lot and lose very little, you are dealing with a balance of fear and greed.
So if you are investing long-term, it's important to not spend too much time
analyzing your portfolio in a time frame that doesn't really matter. So what I
mean by this is that if you are buying, for example, if you are buying like
Amazon and you want to hold onto it for 20 years, you really don't need to be
checking your portfolio like every single day or like multiple times a day.
You don't need to be doing that because whatever it does in a short time span
today is not going to have that much of an impact on what it does over that 20
year time span that you're wanting to hold that stock. You need to not panic
and not make any rash decisions based on what's happening in a time frame that
doesn't really matter in the big picture. You obviously want to avoid panic
selling and you want to avoid getting into a stock because you are afraid that
you will miss out. Another side of this is that you don't want to fall in love
with the stocks that you are investing in. So sometimes if an investment is just
like not working out at all and something's going horribly wrong or it's
just like not the right thing, sometimes you will need to cut your losses so it's
important to be realistic about the things that you are investing in. If you
are in love with a company that you have invested in because you think that it's
going to be the next big thing but all of the numbers and reports and
improvements or lack thereof are indicating otherwise, then you need to be
able to recognize that and to be able to cut your losses. Mistake number two is
wasting money. There are so many different ways that you can waste money
when you are investing. So first of all choose an account that is appropriate
for your situation and for your individual needs. sSo for example a Roth
IRA allows your investments to grow tax-free while something like a 401k
your employer could potentially match, and if you aren't contributing to that
then you are literally passing up free money. Another way that people sort of
waste money is by not reinvesting dividends. Later in life if you are
trying to live off of your dividend income or just use dividend
as an extra source of income, that's fine. But while you are young, reinvesting
dividends just makes your account grow faster so it doesn't really make too
much sense to me why people will choose to not reinvest their dividends. Some
other ways that people waste money are by withdrawing from retirement accounts
too early and also by buying and selling an unnecessary amount of times within a
year and having those tax as short-term gains instead of long-term gains. And
again I am NOT a financial advisor but trading on margin is usually not a
good idea especially if you are a beginner just keep it simple and only
invest with money that you do have because what happens if you are
borrowing money and trading on margin is that if something goes wrong you still
owe that money. So don't waste money like that. Only trade with what you have. And
lastly a lot of times people are paying too much for commissions or they're
paying too many fees to either have a financial advisor or to have some sort
of mutual fund. There are a lot of fees that are associated with different
things when you are investing, so nowadays there are platforms like M1
Finance and Robinhood that allow you to invest without paying commissions. And it
makes it very easy to get started with very little money.
Now sometimes paying commissions is definitely worth it especially if you
are like for example a day trader that needs the TD Ameritrade Think or Swim
platform you - you need that platform and so you don't really care if there is a
$7 Commission. And a lot of times if you are a very active trader you can call
the brokerages and get your commissions reduced by a little bit. It really
depends on what you need, but for a beginner like just starting out, starting
with something like M1 finance is a great idea. So sometimes financial
advisors can be really expensive when really you can do a lot of the same
things on your own and sometimes things like mutual funds will have a really
high expense ratio, so you always want to check the expense ratio on different
mutual funds or index funds or ETFs that you are investing in and make sure
that that ratio is not too high because those little amounts can really start to
add up. And mistake number 1 is trying to time the market. So I think that one
of the most important things is to have some sort of trading plan as
you're going in to any investment or any trade. So what I mean by this is like, is
it a short-term trade? Is it a long-term trade? How long are you holding this? What
is the time horizon for when you want to take your profits on this? Are you trying
to hold this for a month? For an hour? For a lifetime? Like what is your plan? A lot
of beginning investors just totally ignore their risk tolerance and when
they see a stock go way up or way down they just they totally throw their time
horizon out the window and forget what their trading plan was. And again this
just goes back to needing to do your research and needing to have some sort
of plan especially like in the event that we go into a recession or a
depression you don't want to be panic selling and you also don't want to be
FOMOing into other stocks. Patience is a virtue my friend, you have to be
patient with the stock market. Don't chase performance and don't just
automatically assume that a stock is going to go the way that you want it to
go. If you're just constantly jumping in and out of positions because you think
that you have it figured out chances are you are not going to end up
beating the market. If you would like to hear about the mistakes that I made when
I was first starting to invest be sure to head over to the last video and go to
Adventures and Us to watch that video over there. If you enjoyed this video
remember to hit the like button, subscribe to the channel, and I will see
you guys in the next video.