Stock Market (4)

Markets & Mistakes

During my years living in Bucharest, I observed quite a lot of differences between Romania and my little home country in the middle of europe.

As mentioned before, it’s my problem and if I don’t accept the romanian way of life, I am free to go. Nonetheless, I will write about a romanian habit that could be important to change, when you are entering the financial markets as an novice investor.

Whenever in Romania goes something wrong, a big political issue, a loss in football or whatever, the vast majority of romanians spend a lot of time and energy in finding out who’s to blame! Of course, if Steaua looses a game, it must be the referees fault as Mr. Becali would explain again and again in each microphone he gets under his nose.

In my little home country Switzerland, the same amount of mistakes as in Romania are happening in everyday life and I personally am responsible for a few of them. The big difference is, that when something went wrong there, the focus is not on blaming somebody but to analyze the problem, find a solution and make sure the same mistake does not happen again. There is even a proverb:  ‘you are allowed to make a mistake,  but you are not allowed to make it twice.’

So,  if you are considering to invest in financial markets, this is about the only prediction you should believe: You will make mistakes. And if a trade goes wrong, it’s no one else mistake but yours. Accept it and try not make the same misstep again.

Here are 7 mistakes new investors should avoid:

1. never, I mean never, buy shares on credit;
2. only invest money that you can afford to loose;
3. when asking your bank advisor for a good trade, have in mind that he is actually a product seller, not an advisor. So he will sell you a product that’s good for his bank and his provision but not necessary for the investor;
4. always have the trading costs in mind and compare them before opening a broker account;
5. market movements are not based on knowledge everybody has already, but on developments the ones with the best information anticipate;
6. when the market is cheerful and everyone is buying, then sell – when the market is fearful and everybody is selling, then buy;
7. don’t get greedy, if your stock make 10, 15 percent, it’s better to sell than anticipate a further rise – after all, you are getting rich by selling to early and you are getting poor by selling to late.

By avoiding these wide spread mistakes, chances are that you are off to a good start at the markets.

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In the next chapter, we will find out what anyone can learn from the best investor in the world – Warren Buffett: http://www.theleader.ro/stock-market-5/