Stock investment is a risky investment. But, you can get unbeatable returns by avoiding shocking stock investment mistakes in share markets.
These investment mistakes seem to be very simple in nature from the view of small investors. However, it can adversely affect your portfolio in the long run.
According to a 2016 post published in T. Rowe, an investment firm; an appropriate mix of stocks & bonds can help to mitigate effects of volatility on a portfolio.
The term “appropriate” will depend on time horizon & risk tolerance of equity investor. However, as you get closer to your goals, your investment options should also change.
Younger investors have more time for the short term corrections. They should focus on longevity & inflation risks.
On the other hand, retirees may reduce their investment in risky assets.But, equities should still remain as significant portion of your total allocation. Here are 10 shocking stock investment mistakes in share markets:
[You can also watch an exciting video on this post from GetUpWise channel on YouTube.]
(1) Putting All Your Money In One Stock (Under Diversification)
It is one of the most shocking stock investment mistakes in share markets. Most of the small investors prefer to invest their money in a single stock.
Your stock investment in a single stock can rise tremendously if the stock outperforms the markets. However, if your stock plummets then it can even cut your investment into pennies.
A new investor who is starting stock investment with $2,000 or less can invest in one company. But, as you start increasing your investment, you should go for portfolio diversification.
This can be achieved by purchasing stock of fundamentally strong stocks of different companies. Once you have a right mix of stocks, bonds & cash, you will get reasonable return on investment.
Thus, you should never ignore the power of portfolio diversification while investing in stocks.
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