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5 Common Challenges New Investors Face

  • December 18, 2020
  • Drew Ragosta

When you’re a new investor, developing a successful portfolio presents its own unique challenges. Some of these can lead to serious financial consequences that have the potential to set you back thousands of dollars. However, these obstacles shouldn’t sway new investors away from entering the market or dissuade them from learning how to play it. The best way to become a good investor is to acquaint yourself with where others have gone wrong and apply it to your financial strategy. Below we discuss a few of these common challenges and the best way to confront them as a new investor.

Access to too much information. 

New investors are often bombarded with an abundance of useless information. The majority of these shady sources are unhelpful and may not apply to the type of investing you’re interested in. For example, the two schools of thought for investors are generally split between active and passive investing. In this case, a new investor may not understand the difference between the two and apply a passive investment strategy to a stock that requires an active one. 

Learn the difference between passive and active investing here.

Conducting a simple Google search and relying on blog sources to dictate your next investment should never be your strategy. The pool of information you pick from should come from a reliable resource like The Economist or the financial section of the Wall Street Journal. Never take the advice of a random online source when investing and familiarize yourself with a list of verified sources that provide information you can rely on. 

Poor time management. 

Stocks prices fluctuate rapidly. Making a profit depends on buying and selling at the right time. Playing the stock market is a time-sensitive game, and new investors risk losing money if they buy or sell stocks without watching the market enough and making informed decisions. As a universal rule of thumb, investors should aim to buy low and sell high. 

Limited experience and knowledge. 

Successful investing requires experience and a solid foundation of knowledge. It is best to start slow if you’re a new investor and avoid making substantial trades. Take time to become acquainted with how the market works, and the areas that interest you. Some of the most successful traders are experts in a specific area that they’ve mastered over long periods of time. Unless you’re the next Warren Buffet, try to limit yourself to one or two areas to get things started and build your foundation from there. 

Beginner’s luck and arrogance. 

Sometimes new investors will get lucky and cash out on a stock pick. While the stock market does draw some parallels to gambling, it is still a game of study and research. One good stock pick doesn’t mean that you’re the next Wall Street titan and it is still worthwhile to consult the expertise of others. Seek out worthy advice from professionals who are willing to share a few pointers with you. Never become arrogant when you’re new to investing and always welcome the guidance of those who know more than you. 

Check out his article to read about the one devastating mistake investors make. 

Uncertainty where to invest. 

New investors often struggle to find the best industries to watch and invest in. Investing should be a patient process and it is important to research some industries that interest you before committing to any stock. It may help to start with areas you’re passionate about like tech, travel, or entertainment. Focus on industries you follow and are more apt to stay updated on. For example, some investors love trading commodities like oil and are constantly reading up on the latest news in the oil industry. They can use this information to make better trades and capitalize on current events.

 New investors are especially at risk of losing money in the stock market. Having an investing co-pilot like Front by your side helps you find strategic stock picks so new investors can make smart investment decisions. Download the Front app below or visit www.front.org to learn more.

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