Top 10 Stock Investment Mistakes

1 - Buy High, Sell Low

This is one of the common investing mistake even the so called professionals make stock in market. For most people it is hard to resist the temptation to ignore the stock when it is at all time high, or when it is at its 52 week high. Buying stocks at high price and selling when it falls is justified emotionally, but does not make sense logically. There is a potential loss of 10 -50% of the capital money due to this mistake. So wise up when you make your next investment.

2 - Going After Popular Stock

Going after the popular stocks is one of the biggest investment mistakes. Popular stocks includes stocks that are new IPO stocks, speculative stocks, big social media stock without any  strong advertising revenue etc., These are sure ways to lose your money in a short period of time.

3 - Focus only on Short Term Growth

Traders usually focus on the short term growth, but a professional investors focus on their long term investment. In most cases, investors have a more stable growth combined with the force of the power of compounding make them better than short term traders. The saying, Slow and steady wins the race is so true when it comes to long term investors.

4 - Not Understanding Taxes

Stock owned for less than a year is considered short term investment, and more than a year is considered long term investment. Profits made by selling short term stocks are subjected to higher taxes than profits made by selling long term investment. Non qualified dividends are subjected to higher taxes than qualified dividends. Understanding tax consequences on your stock market activities is very important in building your wealth. 

5 - Emotionally Attached Stocks

Getting emotionally attached to a stock is not a good idea. Emotion by itself is good and important. You should know how to use your emotion to think, and not think with your emotion. 

6 - One Big Purchase

Volume purchase of stocks leads to a big swing between profit and loss in the short term, and loss of opportunity to lower the cost of investment in the long term. You can avoid unnecessary roller coaster of your emotion by not getting into the habit of buying lot of stocks at any point of time, instead spread the purchase over a reasonable period of time.

7 - Reacting to Day to Day News

Reacting to day to day news increases the trading activity. This will only make money to the brokerage firm, and nothing to your cause for building your wealth. Not all data is information. Some are informational and educational, and others are opinions and noise surrounding the news. Train to ignore the noise and avoid reacting to every news about the stock market.

8 -  No Plan

Having no plan is worse than having a bad plan. To begin with, just having a plan about your goal, growth trajectory  and a exit strategy stabilizes your mental strength and your emotional intelligence. This  provides an opportunity to improve the plans based on the situation and the circumstance of your beings over an extended period of time thereby testing out the plan at good and bad times. Having a plan reduces the possibility of losing money during panic times and increases a healthy profit during good times. Exit strategy is very important even when you don't have any plans to execute it. My advice to you is, have a plan.

9 - Not Questioning Assumptions

Assumption can lead us in any direction. A valid assumption can improve the confidence level in taking an educated pick of long term investment, whereas a wrong assumption can lead to loss of capital and self worth. Always question your assumption and validate your assumption at all times.

10 - Follow the Crowd

Following the crowd is the easiest way to lose lot of money in a short duration of time. In most cases going against the crowd can save you lot of money and help you grow your investment aggressively. There are no short cuts to wealth generation. Do not follow the crowd. The loss is not just your money, but to your identity as well.