Being a new investor can be a tough learning experience, especially since newbies are prone to making mistakes. The good news is that there are plenty of free resources and tools out there to learn from — especially if you are going to spend some time reading through top stock market and finance blogs. From 401k investing to day trading, there is pretty much a blog out there for everything.
No matter what direction you plan to take, it’s important to realize that your money is always at risk — no matter what the investment. With all of that in mind, let’s take a look at some of the most commonly made mistakes by investors without a lot of experience.
Following the Hype… Read the Blogs, But Research Your Actions
Just don’t do it. Resist the temptation to buy stocks or shares that everyone else is rushing to buy. This is something that you might find on a wide range of websites and blogs that provide stock alerts. In most cases, any website or blog freely recommending stock tips like this, they are probably already in and looking to dump shares when everyone else jumps in. This is something that is also discussed on many personal finance blogs, as new investors are always looking to get rich quick with their investments.
There are also many newsletters, Facebook groups, and social media accounts that you can follow for such alerts as well. Don’t take emails or “reports” that promote certain types of securities at face value. If you do, you could be at risk of falling for a pump-and-dump scheme. If you spot an exciting new investment opportunity that everyone is talking about, first do your research. Assess both the pros and cons before investing your money.
Failing to Assess the Quality of Individual Investments
Let’s say you hear about a hot new sector that everyone is investing in. You may read news articles about it and see promising analyses or reports. So you go ahead and buy a stock within that sector. But several months later, your investment is worth nothing. What happened here?
Again, you likely came across some great information (so you thought) on another website or blog, but probably didn’t dive deep into the full story. This is something we are seeing a lot of the in the regulation space right now — whether it be with medical, bitcoin, marijuana, or even sports betting stocks. All of these spaces are super new and super hot — so the information on each of them might be light, and the stocks can heavily swing in either direction in a moments notice.
With that being said, don’t buy just any stock or invest in securities just because the overall industry is doing well. Consider, for example, the cannabis industry. With eight states having legalized marijuana, and a dozen more contemplating it, the sector is on a hot streak right now. This is especially true with so many benefits coming to light around CBD, and how it can actually improve inflammation and pain levels for a wide range of auto-immune diseases and health issues.
If you look at the value of marijuana stocks over the past decade, it’s steadily been on the rise. However, that doesn’t mean all cannabis stocks are worth the same. Medical marijuana stock is worth far more than recreational companies. The reason being that Jeff Sessions, the firmly anti-pot attorney general, might go after recreational weed even in states that have legalized it.
But no one is out to get medical marijuana. In fact, doctors and policy experts are looking to medical marijuana to curb the opioid crisis. If you are investing in medical pot stocks, then you are making a great investment. But the same cannot be said of recreational weed.
We covered a lot in this section, but again, if you are already following these individual topics through well-known and trusted blogs, this should be nothing new to you. Don’t just look at stock market and investing blogs for your information, always remember to go right to the source and view users forums as well.
Using Blogs and Trading Comparison Sites to Review Fees
New investors are highly likely to put money in mutual funds, index funds, ETFs, and so on. But one thing newbies ignore about such funds are the fees. Look at how much you have to spend in administration fees compared to returns. Otherwise, whatever you earn in returns would just get eaten up by all the fees associated with the fund.
Similarly, calculate how much of fees charged by brokerage firms, investment advisors, and the like affect your returns. Your final profit would rely on these calculations.
NerdWallet, one of the top financial blogs online, is highlighted in the screenshot below from Google thanks to their awesome list of discount brokers and the fees associated with each — yet another perfect example of how reading financial blogs can save you money and help you learn more in the process.
The bottom line is that new investors must be willing to research investments and the costs associated with them thoroughly. Never dive into a new sector or buy stock without being certain of what you are spending your money on. Good research and background checks are crucial to investing safely.
Therefore, be aware of the above mistakes and fix them before it is too late, but also make sure to stay active and always read up on the latest technology, financial and stock trading blogs on the internet today. If you are really devoted to the idea of becoming a professional trading, be sure to consider your options with starting a blog of your own and documenting your journey.