The 9 Most Common Mistakes when buying penny stocks
Now I will list the 9 most common mistakes committed by Inverosres in Wall Street.
1) The price issue
Always know that the penny stock price rises because there are substantive reasons supporting that growth. Also when it drops is because it is multifactorial. When buying a particular stock and the price begins to fall, one of the most common mistakes that investors make is to think that because they are cheap at that time they should buy more to average out the cost.
2) Consider the situation and never the name of the company
It may happen that we feel attracted to a particular company. Either because we like their prodcutos or for any other reason, but sometimes we get away from the most important thing which is the current situation the company is going through.
3) Always decide based on strategies and not on emotions
Normally our emotions are at stake when we talk about the stock market. Obviously it is understandable that an investor feels scared or either really excited to get a fairly attractive yield. But you need to know that being carried away by emotions can completely destroy your portfolio. Remember to leave that moment to buy and not be swayed by emotions.
4) Invest in shares, but not only benefit from the dividends
There are many investors who only take into account whether the company pays good dividends and ignore if it is a strong candidate for successful growth. The dividends of a company are calculated taking into account the amount of money the company gave the investor as a dividend per share over the last year and divided by the market stock price. CompanyX for example giving 3. 5 in dividends during the past year and the share price is 25, then its dividend yield would be: (2.5 / 25) = 0.1%. The problem arises when we want to maintain a stock which is down just because of their receivable dividends. You can reach the low point that the stock is higher than the revenue we get for the dividens and if so we dont cover those losses.
5) Always Diversify your Portfolio
It is still common to see portfolios without diversification. Many people still believe in the idea of becoming a millionaire by investing all their money into one sector. The penny stock market will not work well that way. Whenever you are going to invest you have to diversify your portfolio, which means buying penny stocks from companies that belong to different sectors. Another important aspect to consider is to distribute the money with different strategies, from the more aggressive to the more conservative.
6) Do not take the financial news as entry points
Whenever they appear on TV financial news, you tend to study more the company to invest. The problem is that all these news have already happened and one is buying the shares once the opportunity has already occurred. The opportunity does not become news. Therefore it is desirable to have the economic calendar and financial news only as supplements for investment.
7) The buy and hold strategy is not always convenient
One buys a penny stock to sell at some point, not to die with it. Many people confuse buy and hold strategy, as they believe the stock will end up sooner or later and that is not always the case. Before buying a penny stock it is important to make a study to estimate the time to buy and not hold indefinitely without knowing what to do, hoping the rise at some point.
Always have a method of investment
This is one of the most common mistakes among investors. Many people is influenced by advice from friends, television news, etc. This is one of the mistakes that can lead to bankruptcy faster, since it is necessary that one acquires a habit of investing, learn to read cotables states and to evaluate whether a stock is attractive or not. Having an investment method approach we know when to buy, how and where.
