According to George Santayana, “Those who cannot remember the past are condemned to repeat it.” Whether you are a short-term, long-term investor, or a trader, it is imperative to understand some common mistakes that both new and experienced investors often make in the market to maximize your returns. I have compiled a list of mistakes I made during my early trading days to help you avoid making the same mistakes.

1. Fear of Missing Out (FOMO): Do not Buy a stock without knowing its fundamentals or technical, simply because everyone is talking about it. From my experience, you can make a few bucks, I have suffered more losses than gains most times chasing random stocks that could be part of a “pump and dump.” Yes, it takes time to research an individual stock, but it’s better to take that time to think it through before placing an order, ensuring you are entering at the right time (which is also hard to predict).
2. Not Analyzing Stocks: Taking the time to research stocks reduces your risk of getting into massive losses that could wreck your portfolio. It depends on what works for you—some people use technical analysis by studying the price patterns, previous highs and lows, and other charting tools. Others use fundamental analysis by evaluating the stock based on performance characteristics such as revenues and earnings. It cannot be overemphasized how important it is to research a company’s financial health before investing your hard-earned money to shield you from market volatility. Keep in mind, that a stock might be perfect and check all the boxes but fail to move up in the right direction because of some other factors affecting the broader market, such as inflation, monetary policies, regulations, interest rates, and stock sector conditions, can still influence it.
3. No Trading Plans or Not Following Your Plan: Placing a stock order is as simple as punching a few keystrokes on your device, but the big work is in setting up a plan on when to enter or exit the stock based on your analysis and identifying your comfort level. Having a plan is important, but following the plan is another matter, especially due to emotions. Learning to regulate your emotions when investing helps you follow your plan. In my experience, I have exited a trade too early, only for the stock to continue an uptrend (or a downward trend), and vice versa. However, I have found greater success by sticking to my plans—cutting my losses and letting my winners run.
4. Not Investigating Your Previous Stocks to Understand What Led to Wins or Losses: There are good reasons to investigate your winning and losing stocks: first, to avoid making the same mistakes and mitigate future losses, and second, to learn how to extend gains in future investments. Remember, most tactics that work for one stock may apply to other stocks, and it work most of the time.
5. No Revenge Investing: This happens mostly after one has experienced back-to-back losses. I sometimes enter trades on random stocks driven by emotions to recoup my losses. As you can guess, trading with emotions typically leads to more losses. To prevent further losses, the best thing to do is step away from your screen, find a relaxing activity to take your mind off things and return when you’re ready to follow the right steps to mitigate risk.
6. Being Too Conservative and Failing to Invest More to Maximize Returns: If you are a beginner, staying conservative with the investment amount is crucial to reducing risk and exposure. That helped me stay in the market longer and keep me afloat. However, as your investment knowledge grows, it can become difficult to increase your position sizes, and you may tend to keep your orders minimal, limiting your return on investment even when your portfolio performs well.

Investing mishaps are inevitable. However, understanding how to minimize their impact on your portfolio is crucial to achieving your long-term financial goals. Losses are a common occurrence in the investment world. As a wise friend once said, ‘Losses are the tuition fees paid for the education of trading.’ The key is to ensure your gains consistently outweigh your losses to maintain a profitable investment strategy. Emotional control is a vital ingredient for success in both trading and investing.

Investing involves risks, research or seeking advice from a qualified professional.

Happy investing! Share your experiences, challenges, and questions in the comments section.

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