New investors often get hit with advice from everywhere including family, friends, financial advisors, websites and other resources. While some of this advice may be good, it can be more difficult for beginning investors pick the good advice from the not so good advice. Investing is very personal and what works for one person may not work so well for the next, but anyone just getting started will want tips or advice from people who have been doing it for a while. Unfortunately not all of this advice will be good for them.
Stick With What You Know
While sticking with what you know may initially sound like good advice, this may not be such good advice for beginners. This can work well for people who have a wide scope of knowledge of different sectors of the economy, but if you only know about one or two sectors, like retail or the service industry, you may be missing out on other very profitable industries like technology. Sticking with what you know can be limiting.
Invest In Companies You Like
It sounds nice to invest in companies you like or in companies who make products you like, but this can be a mistake too. Getting too personally attached can be a bad thing when it comes to investing. Not to mention if you like a company whose stock is really expensive, it may not be best to put all of your beginning investing dollars into mostly one stock. Sometimes new investors are willing to overpay for stock in a company they really want to be a part of, but this can be dangerous.
Focus On Short-Term Trading
Short-term trading has become more popular in recent years, due to the 2008 stock market crash. Fewer market experts are recommending a long-term trading strategy and more are recommending short-term trading. The problem is that short-term trading is more complicated as it requires the investor to be able to effectively time the buying and selling of stocks. It can also require more money to make quick decisions.
Invest In Penny Stocks
Investing in penny stocks can be tempting for the new investor for a few different reasons. The price per share is low and if the price suddenly doubles, which isn't uncommon with these stocks, you've quickly doubled your money. But these stocks are very volatile and it is just as easy to lose half or more of your initial investment. You can also suddenly get stuck with shares of stock that no one wants to buy. Keep in mind these shares are low for a reason; some of the companies in this niche are flawed or unstable. This is a tricky area for new investors.
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