They Don’t Want to Know Their Fatal Errors
It’s weird how few people search Google for “investment errors,” “investment mistakes,” or “avoid investment errors”, for example. Far fewer than those who search for the terms “best investment” or “cheap stocks” or “stock buying”. Maybe that’s why there are so many more poor people than rich people.
Various online brokerage firms, investing-focused startups such as Robinhood, Acorns, M1 Finance were seeing rapid growth in their assets and app downloads in the last months. (Techcrunch) Robinhood alone “added more than three million funded accounts so far this year” – wrote the company on May 4.
Newbies Make More Errors
Whatever the reason, many people are starting to trade now. And with that, they take a huge risk. Rookies always make a lot of mistakes. This is the case in every profession, and investing is a profession. In this extraordinary crisis times, an extremely difficult one.
No one knows exactly how long this new coronavirus epidemic will last. Nor is it clear how much damage it will cause to the economy and companies. Nor is it how stock exchange indices, the price of individual stocks, commodity markets, currencies will react. How big will be the price fluctuations, the height of the peaks, the depth of the lows? The last 11 years have been amazing – but it’s not sure at all to happen again in the next 11 years.
11 Years and Nothing Is Impossible in the Investment World
We have already learned from 2008-2009 that there is nothing impossible anymore in the markets. Everything that seemed unthinkable before became possible. For example, in the past, negative interest rates were thought by many to be unimaginable, absurd. And today it’s common in many countries. We cannot rule out that a significant part of the companies now operating will go bankrupt within a few years. But central banks and governments have taken enormous actions. Accepting rescue packages worth many thousands of billions (or several trillion) of dollars. And that can take stock indices to new highs soon.
Risks of Waves
But it is also possible that stock markets will collapse and resurrect several times in the coming years. For example, new crises may follow more and more waves of viral infection. The Spanish flu epidemic of 1917-1919 had three waves. Even today, many fear a second wave following the easing of restrictions that has begun. The possibility of a third wave has already appeared in the sensational-hungry press. Unfortunately, this is also possible.
Also, failing to produce a vaccine or an effective drug against the new coronavirus is possible. There is no vaccine against AIDS for decades. The flu virus mutates almost every year. It can also happen with the new virus.
All these risks and uncertainties are making investing more difficult and investment errors more dangerous. But which mistakes are jeopardizing inexperienced retail investors the most? In every market, independent from the virus? We’ve made a list of the most important 11+1 cases.
Conclusion: Learn More, Avoid Sharks
We don’t want to disappoint you with this list of investment errors, neither convince you not to invest. On the contrary, as we mentioned in the eighth part. We think we will have to invest in the coming years in most countries to keep our money’s value. (In the first line, because of the inflation and zero interest rates.) Instead, we wanted to point out that investing is important and difficult science. The more you know about it, the more likely you are to be successful. The less you know, the easier you to lose.
Learn a lot, don’t rush, and be very careful. The lesser trouble is if you don’t win money. The bigger, much bigger problem is if you lose. Because of the large investment mistakes listed, you can lose most or all your money. Sometimes, even more, than the original amount was. Better to avoid this, especially in such tough times. Don’t gift your hard-earned money to stock market sharks!
We deliberately used the word “grave” in the title, which means “heavy, hard”, but also a tomb in the cemetery. If you lose your money due to a grave error, you can also bury your dreams of investing for a long time or forever.