Anyone who can learn any new skill and knowledge at a young age is also pointing to new possibilities for the future. As in other sectors, investing in the stock market requires a lot of skill. Renowned investor Warren Buffett started investing in the stock market at the age of 11. In the beginning, he did not make any mistakes.
It is natural to make mistakes when trying to learn something new. But since money is a subject, if you make repeated mistakes in learning, the results can be very detrimental. When you start investing from a young age, even if it is risky, there is enough time to improve in the future.
Even stock market investors often make mistakes. Young investors who have just entered the market are more likely to make mistakes. Because practical knowledge may be lacking. Here we are discussing 5 common mistakes made by young investors.
The habit of delaying or postponing
The habit of delaying in the stock market is very harmful. The habit of delaying, postponing or finalizing investment decisions can be very detrimental. In the long run, the stock market is likely to yield good returns. Similarly, the market may continue to decline for years
In both cases, there is a need to start investing quickly and increase the investment even if it is small. The term compounding return is also used in the stock market. This is a very important term. In order to develop your investment as fast as possible and as a means to earn high profits, you should not delay in investing at all.
Just guessing instead of investing
Young investors are always making a profit because of their age. Because they have enough time to invest in the future. The same basis can also be instrumental. Also, young people are more likely to take risks. The higher the risk, the higher the return.Also, since they have ample time, if they lose once or twice, they will have enough time in the future to learn from that mistake and come to the right path. But this argument should not be used as a gamble to kill big returns.
Instead of gambling, young investors need to invest in companies with high risk but significant returns in the long run. Companies with low market capitalization can be considered among the companies that can get higher returns due to higher risk. Such companies are in the process of becoming small and established.
But in the long run, the value of the shares is likely to increase as a well-known or branded company or established shares. Young investors need to diversify their investments in such companies. But always investing heavily in speculation can lead to young investors fleeing the market. Running away from the market while taking a rickshaw is a painful situation. Therefore, it should be taken care of.
Excessive use of leverage
Leverage in the general sense is an investment strategy that uses borrowed money or capital to increase the potential return on investment. Leverage has both advantages and disadvantages. The best time for investors to use leverage in their portfolio is at a young age.As mentioned earlier, there is always plenty of time for young investors to make up for lost time. However, leverage is likely to ruin even a good portfolio.
Therefore, using excessive leverage can be harmful. Leveraging only a small portion of your overall portfolio reduces risk and yields returns. For example, if a young investor has Rs. This may increase the risk to some extent, but it does not affect the overall portfolio much.
Not asking enough questions
Not asking questions is another major mistake that young investors make. If a share price falls sharply, young investors may expect a bounce back. But prices may or may not bounce back. There is no guarantee. The share price can go up or down at any time. But the main question that should arise in such a situation is ‘why’? However, most young investors rarely use it.
That is, why is this happening? What happens now and what is the solution? You should be able to find answers to such important questions. The right investment strategy can only be decided by the question of why the share price has gone up or down. Otherwise, share investment becomes like gambling. If the shares of a company are being traded at half the price you expect, then there is a reason for that. And, it is the investor’s responsibility to find out why.
Young investors who do not have enough time to learn and invest on their own can invest with the help of a person or company who can give financial advice. Similarly, young investors who do not want to do proper research can manage their portfolio by investing in low risk companies and funds. Young investors who have both the desire and the ability to learn, can invest by asking questions and doing research on their own.
All three methods are effective for investing. But when investing in the first way, you have to depend a lot on others. Out of these 3 methods, the method that suits you can be adopted.
Don’t be Investor
The biggest mistake young people make is not investing. When the time limit for investment is long, ample returns can be earned by taking risks. Therefore, it is important to start investing as soon as possible, albeit gradually. Although Warren Buffett cannot be guaranteed to become a billionaire because he started investing at such a young age, he has certainly made a significant contribution to becoming a billionaire.
Experience with money decreases at a young age. So, if you have money, you are more likely to spend it. There is no need to worry about saving for the future. As a result, as we get older, we have to live without money. Therefore, instead of emphasizing on expenses, it is necessary to set aside some part for investment. The habit of investing can also be an important way for young people who want more money.
In the end
Young investors need to make good use of their age to increase their risk-taking capacity. If you study and research basic topics at a young age, you can make your portfolio bigger in the future. Instead of betting on stocks, choose good companies and focus on long-term profits.The choice of what kind of investor you want to become is also important. Another important aspect is to start investing as soon as possible and accumulate sufficient assets for immediate and long term.