Top Three Mistakes Made by Online Investors

Written By Mary Beth Eastman
Last updated November 22, 2019

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best robo advisors
Investing
January 24, 2019

Simple. Thrifty. Living.

There seem to be lots of people out there making good money online, and no doubt you’re hoping to become one of them. If you are looking to invest online, at a brokerage or with a robo advisor, there are some common mistakes that you should avoid. Here are three of them.

For many investors starting out, they are ‘serious’ about making lots of money as quickly as possible. They often figure that jumping into to lots of trade deals is the best move for healthy returns. However, the problem with this is that it often affects how much money you can make overall. This is because when you overtrade, you are more likely to be selling or buying at the wrong time and there are of course fees associated with each trade. Even if your trade costs are only 1 percent per year, these costs soon add up and could leave you tens of thousands out of pocket.

There is a problem with conflating what’s happening right now with an ongoing trend. Some investors will think that if a particular asset is doing well now, it will continue to do so in the foreseeable future. This can encourage them to buy more of the same asset even though the purchase price is rising. It’s easy to make that mistake, especially when you think that you could be missing out on high returns. However, it’s always best to remind yourself that prices can change very quickly, so don’t buy in haste. Robo advisors can help you take the emotion out of investing in instances like these.

As an online investor, it’s always good to have a contingency plan. A stop-loss order can save you from losing too much money when a trade doesn’t do well. It can be implemented for both short- and long-term trading. Stop-loss orders can also be set for when the price reaches a high. That allows you to sell at a high price and hopefully lock in profits. Once it has been set up, it will be triggered when the price reflects that of the predefined limits.

As a beginner just starting out, you will inevitably make some mistakes along the way. We all do, but being aware of some of the most common pitfalls should hopefully save you some time and money.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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