The sole purpose of investing in stocks is to build wealth, and yet so often, people fail to do this because they tend to overlook some common mistakes that are made every day by investors around the world.
Here is a list of mistakes that you should keep in mind that will help you build wealth that most investors aspire towards:
#1: Decisions based on Fear
Many an investor after completing meticulous research, select a company to purchase large amounts of stock and then resort to dumping the stock for fear of losing money when the company tends to do badly. If it isn’t obvious enough, this behavior is foolish, and perhaps tends to happen because investors have forgotten the simple rule of ‘buy low/ sell high.’
There’s no doubt that sticking to this rule will ensure that you make profits in good time!
#2: Trading frequently
Trading and investing means two different things. With the former, it is about buying stock from a company whose price is due to rise shortly, and after the trader sells the stock, they proceed to do the same thing with another company.
Investors rarely trade as frequently as traders do as their investment is tied to the how the company they have invested in does, and in giving the company time to develop, they end up more often than not, being able to profit from the appreciation of the shares in the future. And it is these investors who make a fortune ultimately, thanks to their patience and foresight.
#3: Too much Diversification
Almost every investor knows that putting your eggs in one basket is not a good idea. However, if you go about spreading your investments too thin, you are going to end up with transaction costs and brokerage fees that exceed the profits that you have made, thus causing more damage than good.