As with most things in life, the more you learn the more mistakes that you will also know about. This is no different when it comes to investing. As a new trader, there are many mistakes that you can make that may cause your portfolio to lose money and ultimately harm your overall financial situation. In this article, we will discuss some of the biggest investing mistakes.

Picking The Wrong Stock for Your  Portfolio

Many people don’t realize that buying a stock is like buying a piece of a company, and you’re investing in that company. Similar to how different people might want to buy different things with their money depending on their preferences, different stocks would be better for certain portfolios than others. So if you were to buy stock in Coca-Cola (KO), your portfolio would look completely different than it would if you bought Apple (AAPL). A good way to determine the right stocks for each portfolio is by looking at your age, risk tolerance, time horizon, and current income.

If you are over forty, live in New York City, have $10,000 to invest right now, and need the money within 2 years to pay for medical expenses, you should think about buying stocks like McDonald’s (MCD), Apple (AAPL), or FireEye (FEYE) because they’re big companies that offer reliable dividends. According to this overview of best stocks to buy in 2022, these stocks are some of the greatest picks for those with a low-risk tolerance and a long time horizon due to their ability to grow in value and provide reliable dividends. On the other hand, if you are 20 years old with no dependents and can afford to lose your investments, then it probably makes sense for you to buy riskier stocks like Amazon (AMZN), Berkshire Hathaway (BRK.B), or Tesla Motors (TSLA).

Starting With Penny Stocks

Penny stocks are shares that trade at $5 or less, and oftentimes for even less than one dollar per share. Penny stocks are typically traded over-the-counter (OTC) rather than on a major exchange like Nasdaq or NYSE. Since pennies stocks are traded for fractions of a dollar, they can be considered risky investments because there is no guarantee that the price will not fall to less than one cent per share.

Penny stocks aren’t necessarily bad investments (some companies like Apple began as penny stocks), but it’s important to understand the risks involved when buying them due to their volatility and lack of regulation. Another problem with investing in penny stocks has to do with liquidity. There’s always a chance that if you need your money back before any other investors, there may not be enough shares available at any one time. You should avoid these stocks if you’re inexperienced or looking for long-term growth. However, when you become a much more experienced investor, you will be able to handle the risk and volatility that comes along with penny stocks.

Not Knowing What You Are Investing In

No matter how old you are, your income level, or anything else, it’s important to understand at least the basics of what you’re investing in. If you can’t explain in a complete sentence what and why and how you’re investing in then you probably shouldn’t be doing it. It is also important that if there is something about the company that does not make sense to you, do further research before making any investments.

If after looking into the company/stock/industry more closely still doesn’t seem like something beneficial or worth your time, don’t invest. But if this is something that everyone seems to be talking about and you’re just not sure if it’s something for you, do more research. There are many kinds of resources that can help determine whether or not a company is worth investing in, but some things to look out for are the number of shares outstanding, the type of shares, what factors affect stock price fluctuations, and what kind of returns one can expect to earn on their investment. Most importantly though; know yourself. Understanding your limitations when it comes to risk tolerance before making any investments will ultimately determine whether or not this is something you should be doing with your money.

Not Understanding Expected Returns

Riskier stocks have higher expected returns. That means if you buy the stock at undervalued prices, you have a greater chance of making several times your money down the line. However, that also means that there is a greater chance that the shares could become overpriced and then lose their value in several years. So unless you are willing to hold onto these companies for 5+ years, it’s probably best not to invest in them.

When you invest in stocks, you should understand how likely or unlikely it is that your investment will make a profit. As long as you are aware of what kind of stock (and ultimately company) you’re buying into and what expected returns can be had on your investment, everything should work out fine.

Not Understanding How Your Portfolio Works

At its core, investing in stocks is making an educated bet on the future performance of companies that produce products or services that will grow exponentially enough so that they trade higher than when you bought them. However, most people don’t understand the “why” and the “how” of this whole process and instead make random investments in different companies.

This is not a good idea because if you aren’t thinking about what your money goes towards then you will be unpleasantly surprised when something that was once profitable no longer becomes so. That’s why it’s important to keep track of how your stocks are performing over time and also why it’s important to diversify. If one company does poorly, there might still be another company doing extremely well at the same time so you should profit from both or at least break even with one another. There is nothing wrong with taking risks but if you want to make sure that your investments are going towards a reliable place where you can trust they will grow, diversification is key.

Investing in stocks can be a scary prospect to those who don’t know what they’re doing or who aren’t aware of certain risks involved, but it doesn’t have to be. As long as you do your research and understand how your money is being spent, there will never be a better time to invest in the stock market than the present. Not every risk pays off, but the ones that do are well worth it. By keeping these five major mistakes in mind and avoiding them entirely, you will be on your way to investing like a professional.

What is Spread Trading?

Spread trading – also known as relative value trading – is a method of trading that involves an investor simultaneously buying one security and selling a related security. The securities being bought and sold, often referred to as “legs,” are typically executed with futures contracts or options, though there are other securities that can be used.