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Common mistakes new investors make

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Even the most experienced investors make mistakes. Logically, new investors would have to “pay” to learn before they become more invest-savvy since they are supposed to be new to the game.

If the trading market has a rule restricting the ages of investors, that is, only those from, say, 30 years old, are allowed to play with shares, then the risks would be confined to only these people. But there is no such restriction.

New investors can be young or old, with totally different reasons for investing. Young couples want to build up their monetary assets for the future. On the other hand, retirees or near-retirees – those who have been avoiding the market, having preferred to put their money in insurance, banks or other areas – may suddenly wish to be more adventurous.

Familiar or not with the market, whatever the size of your investment capital, you are a new investor, all equally vulnerable. To get better returns, these are the top three mistakes to avoid.

Have no plan

Invest without any sense of direction or goal. This is perhaps the most common error that new investors make.

Younger investors, especially, should be clear what their game plan is. What are you investing for? Are you investing for your children’s education, house, retirement, the next generation? You act differently when you become parents or, later, retirees.

How much are you prepared to risk? Do you intend to follow the market closely and, hence, be actively involved in taking profits and reinvesting? Or are you content to take a long-term view?

Follow “hot tips”

Such tips are usually not based on facts. They are the result of speculation, rumours, so-called “inside” information or developments involving key people of a company. To invest on such flimsy grounds is tantamount to gambling.

Not knowing enough

This is really common sense. If you are new to investing – to the processes, the players, the sensitivities of the market – you want to learn as much of everything as possible.

To avoid the mistakes above, here are some pointers:

• Do some study and research. Read up. Find out how the market works, the rules, laws, liabilities, penny shares, blue chips, the trading companies.

• Attend talks, seminars and workshops. This is a useful, short cut way to learn from the mistakes of others or to pick up some investment strategies from experts.

• Until you know better, stick to the tried and tested. Buy blue chips, the fundamentally sound and less risk shares.

Keeping this in mind, here are some long-term and short-term investments that you can consider. – Asia One