10 Mistakes Every Investor Makes and How to Avoid Them HTML version
10 Mistakes Every Investor Makes & How to Avoid Them
Mistake #3 – Confusing Investing with Trading
People who are not investors often think investors are the high-
strung, fast-paced people in the New York Stock Exchange pits, or
those that stare at stock charts all day long to catch a quick profit.
These people are not investors. They are day traders who play
markets for a living.
Investors view stock trading behavior as the same as gambling.
Traders may not even care about the company they are buying, they
just hope to accurately predict the direction of a movement in order to
make a quick profit. They move in and out of positions quickly and try
to make money off the short term ups and downs the market takes.
Often they use margin balances, or borrowed money, in order to
leverage their positions and make money on each up or down tick of
the market. With this strategy, it doesn’t take much movement in the
market to make money, but it also doesn’t take much to lose it all.
Investors are much different. They are
interested in the certainty the stock
market returns as a means to produce
wealth, as opposed to the possible
income it can produce. For that reason
they are less concerned with the day-to-
day activity in the market and are not
depending on how the day goes in order
to produce immediate income. They know that over time the stock
market has historically trended up and they take advantage of the
slow and steady profits the market will return. With those profits, they
reinvest their earnings in order to take advantage of compound
interest and accelerate their net worth.
Investors also think differently about the assets they are purchasing.
A stock trader is simply trying to buy something cheap and flip it for
more money in a matter of days or even minutes. An investor knows
that the market is too complicated and does not act rationally in the
short-term, and is too difficult to predict. But they do know that great
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