The biggest mistakes ordinary investors make are all pretty obvious. These are the kind of mistakes you can avoid by applying common sense. Still, they are made again and again.
Here are the 5 biggest and most common mistakes ordinary investors make:
1. Being swept away by exciting stories.
If a business story sounds too easy or good to be true, stay clear.
2. Investing in businesses you don’t understand.
If you don’t understand the business you’re investing in, inform yourself first thoroughly or otherwise you are investing blind.
3. Allowing yourself to be bullied by good salespeople.
Whenever someone tries hard to sell you something, take that hard selling to be a signal: Stay away!
4. Investing in trends too late
There are times to get into a trend and a time to get out. Pay attention to the fundamental economics of the investment and ignore the excitement caused by a bubble.
5. Investing without a way to limit your losses
Never get into an investment unless you have a way out. There is always a way to limit your downside as long as you identify what that is before you make the investment and stick to it.
Sven Franssen