5 Common Investing Mistakes
Updated: Jun 23
Recently a lot of people have started investing and trading stocks and crypto. Everyone is talking about their stocks and crypto and financial plans. The surge was most likely due to easy-to-use apps and exchanges. People FOMO in thinking it’s easy money and most make the same mistakes. I’m not judging. I have made many mistakes and learned from them. Trading and investing can be a great way to build wealth, but they should be approached with caution.
There are many ways to make money by trading and investing. There are ways to make money when the market is going down or up. Some people lose a lot of money trading and investing. I will share a few common mistakes that people make when trading and investing and ways to not make those mistakes.
Mistake 1 – Dreams Don’t Come True
Based on my own experiences, I sometimes make foolish investment decisions based on the dream of big returns or marketing ploys. I would jump onto hype trains, which are many in the crypto space, and crash with communities that get dupped. The basis of these decisions is imagination and greed. It would be like when I purchase a lottery ticket and dream of big wins. Nowadays I analyze teams and projects and stay away from untrustworthy projects with no utility. I throw a few bucks at some of the crappy projects like I would a lottery ticket.
Mistake 2 – Stay Calm and Take a Deep Breath
I have at times not been able to stay calm during market fluctuations and would make decisions based on fear and uncertainty. For example, I would see my stock or crypto start dropping and sell at a loss even though there was no real reason for the drop.
My decision was based on the fear of bigger drops. I should have analyzed the market and assets at the time and realized there was no real reason for the drop in price. If I had held those assets, I could have made a profit rather than a loss. There are times when it is better to take a loss, for example when economic conditions are poor.
To prevent these mistakes, when markets fluctuate take a deep breath and pause before executing the trade. Analyze the markets and trends in charts. See if there is a real reason for the drop in value. Wait a few hours to a few days before making up your mind. Don’t react based on fear.
Mistake 3– Research and Analysis
The people who make money on a constant basis trading and investing are those who can make smart decisions not based on emotion. They plan and do not make emotional decisions.
This is not as easy as it appears, which is why many people lose money. The losers sometimes try to trade based on a gut feeling, daily pumps/dumps, or what an influencer said. They don't base their decision on facts and proven trading techniques and analysis like the RSI or Relative Strength Index.
Research needs to be done to analyze stocks, and long-term and short-term market conditions. See some educational videos about investing on youtube, read articles or take courses online to understand the basics. Spend time going over financials, reading whitepapers, reading opinion posts, and going over press releases. Use this information to make a plan on when and if to enter the investment and when to take profits and where to set stop losses. You can make this process fun by taking it like solving a financial mystery. To the winners go the spoils.
Mistake 4 – Attached to the asset
At other times, I would become attached to assets and not take profits. The asset’s value would shoot up and I would hold it. I would imagine the asset's value would continue rising and be worth more. I would imagine how I would feel if I had sold now and missed out on bigger gains. Then to my despair, I would check this asset in a few weeks and find big losses in value after others have sold and taken profits. My decision to hold was based on greed; I wanted to find the peak, which is impossible.
Investors need to be disciplined and take some profits. This can be done by setting a limit order.
Mistake 5 – Degen Gambler
The gambling mentality can set in with trading and investing. When you lose money, you may throw more money into riskier assets or bets in an attempt to make the lost money back. Most of these kinds of plays are done out of desperation and lead to bigger losses.
If you have made big losses or have become obsessed with trading, you may have a gambling problem. People with gambling problems generally chase the rush they get when they make big money. They do this regularly and make stupid financial decisions, which lead to big losses. The best solution for people with a gambling problem is probably abstinence or not trading or investing. If you need assistance, go to a professional or for Gambling Anonymous Meetings.
Furthermore, I would recommend being wary of taking loans and investing with that money. When playing with loans, there is a lot of pressure to make money. This causes stress that may negatively impact your physical, emotional, and mental well-being. Health is very important and should be more important than making money.
In conclusion, some people can make a lot of money by trading and investing. If you fall into the loser category, you should reassess your investment strategy. Consider giving up on it, if you are consistently losing money or have a gambling problem. Another option would be going to a financial advisor or depositing your assets in a fund.