INVESTING FOR BEGINNERS: COMMON MISTAKES TO AVOID EARLY ON

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Being a novice to the world of investing is difficult to accept by anyone successful in school or in their business career, but for some reason, we all expect to know what investing is all about without doing a bit of work to justify that opinion. Beginners, who blindly leap into the market, may get lucky, but most of the time they will quickly learn how cruel markets can be. Even Warren Buffett was a beginner at some point in his career. He may have been a quick study, but he surely learned the importance of knowledge, experience, and controlling one?s emotions as key factors for success.

There are several websites on the Internet that are devoted to teaching you basic investment principles and skills. Start by building awareness for the craft, and then keep in mind the following list of mistakes that should be avoided:

1. Lack of Education: As amazing as it may sound, novice investors are an impatient lot, eager to test their mettle without the least bit of instruction. Investing is not like a video game or like riding a bicycle. Read as much as you can, and then sign up for a formal class. You need to learn from the experts. Accept your ?apprentice? status, and leave your ego at the door;

2. Lack of Planning: If you do not know where you want to go, you will never get there. During your training, you will discover what kind of investor you are, how to set investment goals, how to measure risk and read charts, and how to approach the market with discipline. Write everything down, and keep a journal to review your day-to-day progress;

3. Lack of Experience: You do not need to be a stock market genius, but you do need a sound intellectual framework for making decisions. Confidence will come from experience, and the only way to get that early on is by practicing with ?virtual? accounts. Many stock tracking sites will allow you to construct ?make believe? portfolios, and then follow their performance. This practice time is an invaluable teaching tool. No shortcuts allowed!

4. Choosing a Broker or Adviser: The Internet has been a great enabler for trading everything from stocks to forex, but it has also made us very trusting of ?invisible? business partners. Nearly all investors admit that they either met their adviser personally or through a friend, but never checked out his credentials or references. There are unscrupulous brokers out there. Do your due diligence before choosing your trusted business partners;

5. No Suspicion of Fraud: The criminal element in our society always gravitates to where the money is. Be especially skeptical of unsolicited offers, no matter how good they may look or sound. Beware of complex securities and fast talking salesmen. You are your first and last line of defense when it comes to stopping fraud in its tracks;

6. No Understanding of Risk: Investing is all about risk and how to manage it. Low priced stocks are not bargains. Do your homework in this area, and read as much as you can about a company or fund, long before you consider buying any shares in it;

7. Lack of Diversification: Never put all of your eggs in one basket. You are setting yourself up for failure if anything negative affects your single investment company. No-load Mutual and Exchange Traded Funds (ETF?s) were created to help you with this prudent requirement;

8. Exorbitant Fees: Some brokers, insurance companies and mutual funds charge outrageous fees. Be sure to read the small print. Most fees are hidden there. Besides, less fees means more to invest;

9. Enticing Tips: Avoid these at all costs. No one has insider information, and if they do, they are breaking the law, and you are too if you follow it. Most tips on television have already been acted upon, so forget those. As for emails and newsletters that preach ?hot tips?, these are more than likely trying to pump up a stock?s value so someone can dump his large position on the unsuspecting market. ?Pump-and-Dump? is one more fraud to avoid;

10. Emotional Involvement: It is easy to get emotionally married to a stock. Emotions can make you hold when you should sell, and sell when you should hold. You must learn to control them or they will be your undoing. Rely on your disciplined approach to pick entry and exit points before you ever buy the first share.

Let these guiding thoughts help you avoid a few of the early pitfalls in investing. The learning process will never end, and always be flexible when market conditions change. In the end, investing can provide enormous financial rewards and actually be fun at the same time.