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The convenience of online investing makes it attractive. But there are some mistakes that are all too common among online investors. Here are the top three mistakes online investors make:
When you invest based on speculative concepts, you are setting yourself up for failure. That’s because speculative investing like day trading or investing in penny stocks often results in short-term gains and isn’t sustainable over time. Take, for example, penny stocks— the stocks that cost $5 or less per share. This type of stock often attracts online investors thanks to the low cost per share. So, that means you won’t need that much money to get started with investing in penny stocks. Also, penny stocks have the potential to double or even triple your money if your investment moves in a positive direction.
But the problem with investing in penny stocks is that increases in your investment rarely occur. Moreover, you can lose your motivation for investing your money in more profitable markets and stocks if you get put off from losing money in penny stocks.
Avoiding this mistake calls for staying away from investing in penny stocks and any form of speculative investing. Instead, consider diversifying your portfolio, planning for failure, and investing for the long-term.
Many online investors don’t research the company they are trading stocks with and typically go with their bank to do trades. But banking on your bank can cost you in the long run if you plan to trade substantially. That’s because banks typically charge a fee for buying and selling your shares and for placing orders on your behalf. You can avoid the mistake of paying high fees by using online investing sites that do not charge for selling and buying shares, such as Robinhood.
One big growing trend with online investors is they are doing little and even no research on the company that they invest their money. For instance, this is similar to you investing in a company because you love their product but failing to research its performance in the market or keeping up with major changes, such as if the company goes bankrupt. Avoid making this mistake by doing your research before making your investment. Always read the company’s latest news and look at the current trend the company is moving towards.
Online investing is a great way to achieve financial growth. But it’s important to invest wisely. Avoid the top common mistakes mentioned here, and focus on doing your research, investing for the long-term and reducing your investment costs. By taking these steps, you can improve your chances of growing your portfolio.