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What's the Biggest Mistake First-Time Investors Make?

Summary

Be, baka mapapaikli mo pa to,,, HAHAHA haba kasi xDDD

Investing in the stock market is a very complicated game. Many people may enter with
high hopes expecting they would gain more in return, with them ending to being crushed and
broke after trading stocks. First-time stock market investors often enter this eccentric world of
numbers with false expectations that ultimately lead them towards mistakes. With this issue, this
article discussed from The Experts: What's the biggest mistake first-time investors make?
First, investors must beware because the past is not the future. Mike Piper, a CPA, said
that new investors draw all sorts of faulty conclusions by assuming that the results of one
particular period will look like the results of some other particular period. Past performance
figures is not a good method for predicting future top performers. Looking at the past does not
show us what will happen.
Second, first-time investors must not try to time the market. In Rick Ferris experience,
he made a $2,000 investment in a popular U.S. stock mutual fund. He checked the charts and
was convinced that the market was poised to head higher. Stock prices fell another 10% almost
immediately. He sold the fund. That's when the stock market began its 18-year bull run. He
noted; Trying to time when to buy was my first mistake; getting out was my second.
Third, according to Meir Statman, the biggest mistake first-time investors make believes
that they must identify winning investments before they invest. The second-biggest mistake is
listening to family, friends, and gurus who claim to identify winning investments. First-time
investors, like most long-time investors, do better with diversified portfolios, aware that winning
investments are easier to identify in hindsight that in foresight.
Fourth, Terrance Odean believed that the biggest mistake many first-time investors
make is to buy individual stocks instead of mutual funds. Performance is not predictable; fees
are. Buy well-diversified, low-fee open-end index funds or exchange-traded funds.
Fifth, first-time investors must know their appetite for risk. In Larry Zimplemans
experience the biggest mistake first-time investors make is that they don't properly think about
"risk" versus "reward." They tend to invest in riskier investments than they really have an

appetite for. Then when the value of the riskier investment declines, they will panic and sell out
of the investment due to the decline.
Sixth, investors must accept that markets are unpredictable. Charles Rotblut said that
not accepting the simple fact that it is impossible to accurately predict what the market is going
to do. Everyone is working with a cracked crystal ball. All we know for certain is that the market
will rise, unless it doesn't. The sooner you accept this reality, the better off your portfolio will be.
Seventh, dont invest your emergency money. The most common mistake Manisha Takor
see that first-time investors making is investing money in the market that should actually be kept
in an emergency fund or cash cushion. Or, said slightly differently, the mistake is investing
money that you know you need to spend in the near to medium term.
Eighth, according to Christian Magoon, first-time investors are attracted to the latest
investment winners and ignore the losers. The problem with this philosophy is that investment
winners and losers tend to rotate due to many influences, including the business cycle and
interest rates.
Ninth, according to Greg Mcbride, a common mistake of both novice and more
experienced investors is chasing hot performers by extrapolating past performance into the
future. Combining a properly diversified portfolio with an eye for value when investing money,
are good ways to avoid the inevitable disappointment of chasing performance.
Lastly, George Papadopolous said that the biggest mistake first-time investors make is
not investing enough. They rely on overly optimistic investment returns to achieve their
cherished long-term goals. Also, every investor should have a cash emergency fund saved up to
account for any unforeseen expenses before he or she commits any funds to the financial
markets.
Reaction
((((((Reaction to content (Do you agree/disagree with the points presented?)))))

This article is an eye-opener for us students. We agree with some of the experts on
what they had stated like in Mike Piper statement where he said that past performance figures is
not a good method for predicting future top performers. According to an Investment Company
Institute Study, about 75% of all mutual fund investors mistakenly use short-term past

performance as their primary reason for buying a specific fund. Therefore, we agree that past
performace is not an indication to future return. Magdagdag ka nalang ditto ng mga agree mo
be HAHAHA wala na ako masabe xD
However, we disagree with Meir Statman where he stated that it is a mistake listening to
family, friends, and gurus who claim to identify winning investments. In our point of view, your
family and friends will never put you down and will help you on your investing journey, so it is
not a bad idea to ask from them. (ditto be , yung mga disagree HAhAhAH)
Learnings
Application of learning (How will you apply these points in your life experiences AND principles
discussed in Financial Management1?)
This article gave us a wider perspective on the mistakes most people often make in
investing stocks. In this article, we learned that investing in stocks is no easy. It takes variety of
knowledge for us to understand and know more about stocks. It covered lessons that we can
apply when we invest in stocks.
As we have learned in financial management specifically financial market, every
investment comes with a certain amount of risk. That is the nature of the stock market, and of all
investments. Newcomers often don't properly evaluate the risk of their investments, or their own
tolerance to that risk. This can cause first-timers to make flashy moves with serious life savings
that quickly land them in the dump.
This article is very helpful as we go along in the future as we decide to engage in stocks.

HAPPY NEW YEAR!!!

HAHAHAHAHHAHA
Source:
http://www.wsj.com/articles/SB10001424052702303393804579311062582473556