Everyone Make Mistakes, But The Important Part Is To Learn From It
Every professional investor was once a grasshopper. Making mistakes after mistakes is how they learn in order to get to where they are today. I will give you 5 investing mistakes young earners make so you won’t have to face the consequences yourself!
Check out my other blog posts related to this topic!
- What Are Dividends? (Dividend Stocks For Beginners)
- Investing Tips for Beginners (How I Earned 20% On My Investments)
- How to Invest $100 in 2019
1. Not Investing Sooner
The first out of all of the investing mistakes that young earners make is not starting to invest. Investing in the stock market doesn’t require a lot of money to begin. You can start investing with as little as $100. Sure, the scope of how many and what you can buy is limited, but the first mistake you can make is by making excuses.
Even if it’s as low as $100, use this amount to learn the basics of investing; see how the stock market works, get comfortable with your money on the market, measure your risk tolerance, etc. The early stages of your investing career should be used to learn. You will inevitably make a few mistakes and take a few losses, but that’s just how we all learn.
Two Excuses That Many People Make
Don’t use “not having enough money” as an excuse, you should be allocating a percentage of your take-home income just for your savings. Check out my 50/30/20 budgeting method to help you budget your money into necessities, wants, and savings.
The second excuse that many people make is “the timing isn’t right, I am waiting for the perfect opportunity to buy in when it’s at it’s low, so I can make a huge gain from selling at it’s high”. The better option would be to buy in, hold, and let the power of time do its job. The longer you procrastinate and wait, the less likely you will get started.
2. Basing Your Investing Decisions On The Dividend Yield
A common one among the investing mistakes that young earners make is falling for the dividend yield trap. Everyone loves dividends because it’s extra cash going into your pocket, which is why beginners look into the dividend yield percentage when basing their decisions.
What is a dividend yield? This is the percentage of the amount of dividends you will receive for the price of the share. Pretty much it’s how much bang for your buck you will be receiving for the price of the share. Don’t fall for this trap! Just because the percentage of the dividend yield is high, it doesn’t always mean it’s a good investment. Head on over to my “dividend yield trap” blog post to read more details of this trap!
3. Trying To Diversify
Diversification is a good way to prevent losing all of your money when things go south. Generally when some sectors are experiencing issues then other sectors may leverage from it.
The only problem is that diversifying incorrectly is one of the investing mistakes that young earners make because they end up investing in a sector or company that they have absolutely no idea how they operate. You should only invest into companies that you support and know, but the problem with divesifying is that it can be very difficult to research all of the different companies.
It’s better to invest into 10 companies that you know the inside and out rather than investing in 30 companies that you absolutely know nothing about.
If you want some tips on how to invest on the stock market then check out “my investing tips for beginners blog post”.
4. Being Too Greedy
Human emotions is a main cause for some of our losses when it comes to investing in the stock market. We may either decide to take a quick loss to avoid further losing on our sad investments or we lose a huge gain due to greed.
I invested in NVDA, and although it was a roller coaster ride of intense emotions mixed with rage and happiness, the stocks made me a huge capital gain. One day I was at a loss, the next I was up 20%, but wait it gets better! Eventually the volitality stopped and it kept on going up and up! 20, 22, 25, 30, 35, eventually I was up 40% after a year! I wanted to see how much more it can increase!
“few months later” – Spongebob
I was at a loss of 20%. Did I learn anything from this? Don’t be greedy! If you’re already making 20-30% from a volatile stock then cash out! Sell the difference and invest into something else.
5. Following The Crowd
The last one out of the investing mistakes that young earners make is that they follow the herd rather than to do their own research and to trust their own instinct. You as the young investor need to learn how to invest for yourself and not rely on others. Asking for opinions or seeing how others think is okay, but ultimately this is your money at the end of the day.
Don’t blame others when your investments don’t turn out well; do your own research and develop your own investing strategy to help you achieve finanacial independence!
The Conclusion To The Investing Mistakes That Young Earners Make
These are the invesitng mistakes that young earners make. No matter who you are, you are bound to make mistakes along your investing journey. I hope this blog post will help you on your investments! If you’ve already started investing then let me know down in the comment section below of any mistakes you’ve made in the past!