10 things newbie investors must know for their survival

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Being a newbie investor is a lot like being a trainee sent to a war zone. One wrong move, and you’re job is over before it gets started. Investors need to develop a sixth sense when it comes to putting their money down. Newbies make a lot of mistakes, and most of them can be avoided with some careful emotional control. This list takes a look at 10 of the most common newbie pitfalls to trading and how you can avoid them.

1) Learn to make your own decisions.

Everyone will give you advice. Most of it is worth crap. You need to make your own investment decisions. It’s your money, and believe me, no one cares if you lose it. In fact, many are rooting for you to.

2) Never blindly trust information.

Investing isn’t a cult. You need to independently confirm every thing you hear about a stock or a company. People will lie, because they stand to make a ton of money from stock sales. They’ll gladly mis-represent information, so insist on looking at the real thing.

3) Do the work and understand what you’re buying.

Stock investing a fairly complex topic. It could take you many months or even years to master the basics. Mastering the basics is what you need to be concerned with. If you really thing there’s a fast buck coming your way, you need to wise up.

4) Develop a trading style or system.

Make up a system that works for you. Be unique and don’t base all the ideas on other people’s systems. Every single system has a weakness, or all traders would get rich. But the point is to craft an original investing method that works for your personality.

5) Ignore “hot stock tips”.

Most hot stock tips are cooler than Alaska in January. If they were as hot as Shakira, then they would be implemented by the person who has them. The only information about investing that’s released to the masses is outdated.

6) Most people who recommend stocks do so because they have a financial inducement.

Don’t kid yourself about recommendations. They’re rarely done for free. Be aware that if you purchase a stock at one price, the chances are it was recommended after being purchased for a lower one.

7) Concentrate on one sector.

You won’t be able to learn about every company or stocks. You’re better off being intimately familiar with only a handful of stocks.

You need to put big money to see big profits.

Don’t delude yourself about quitting your day job on $5k of capital. It’s not that much money, sparky. You need a major bankroll to make decent money.

9) Don’t overdiversify or put too much money into too many stocks.

If you do, you can expect to have a hard time getting returns. If you start with a small amount of cash, you need to concentrate in one stock to have the best result.

10) Use stop losses.

Don’t ever lose more than ten percent on any trade. If you use a stop-loss, you can guarantee that your downside is never less than 10%. This could save you in the event of a freefall.

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