How to trade stocks more calmly: Avoid these mistakes

 

When trading stocks, it's important not to base your investment decisions on gut feelings. How to do it and more!

When a stock you own soars 30% in a matter of weeks, there's an understandable rush of adrenaline. But this excitement can also cloud your thinking. When you first read about a stock, especially if it's something outlandish like "unicorns" or "green energy," you probably have a lot of questions -- and it makes sense, too. But once you start buying stocks and watching the value continue to rise, your emotions may be playing tricks on you. The truth is that investing isn't always exciting. In fact, many investors would say they find it downright boring most of the time. But they always bring in money and are less risky than the supposed insider tips.

Don't fall for the hype

There are many hyped investments out there, but don't fall for them, especially when you're just starting out. In the tech bubble of the late 1990s, investors were lured into throwing money at anything with ".com" at the end of the name. During the real estate bubble of the mid-2000s, too many people were blinded by the idea that real estate could make easy money. We can't see the future, but we know that past bubbles are a prime example of investor irrationality. And unfortunately, this irrationality can be found elsewhere as well. For example, if you see a stock that has doubled in value in a short period of time, you have to ask yourself: is this stock really worth twice what it was last month?

Don't act on instinct

Investing is more than just buying stocks, and even if you only buy a single company's stock, it's more than just a piece of paper. They represent a part of a company's operations (often a small part, but a part nonetheless) and they bring you into a long-term relationship with the company. If you buy stocks and let your feelings guide you, you're likely to make bad decisions. As a result, you will likely be stressed about your investments as well. You should invest in stocks you believe in, but if you get too emotional, you can lose sight of why you bought them in the first place. This can lead to ill-considered decisions, e.g. B. to a sale at a loss,

Be suspicious of information from analysts and commentators

When you first learn about the stock market, you hear a lot of people talking about things like P/E, EPS, and price-to-book. Most of these metrics are helpful, but they can become crutches if you rely on them too much. One analyst will rate a P/E of 15 as too high, while another will find the same P/E to be cheap. Analysts are often biased, and most of the time, many of them are just plain wrong. If you're just starting out, you're probably more vulnerable to bad information than a seasoned investor. We all start at the bottom, so it's important to recognize the limitations of what you hear from others.

summary

That's not to say that emotions don't have a place in investing. Your emotional state has a lot to do with your willingness to invest and stay invested through ups and downs. Excited tweets, tips from your parents' friends, and tips from your financially savvy friends are helpful but not necessary to investing. And investing isn't always exciting. In fact, it can be downright boring for most people. There's no need to rush into buying a stock after it's doubled in value. But that doesn't mean investing isn't exciting. It's just a different kind of excitement.

Lokasi:

Berbagi :