Investing is not based purely on chance. There are instances when amateur investors may invest in a company before it skyrockets. Usually the most successful investors understand the importance of how to manage their portfolio.
Over-trading
When dealing with stocks investors, especially amateurs, have a tendency to look for the homerun. Investors usually want to go with a stock they feel will do well in the current economy without doing extensive research. Usually, when you have multiple stocks in your portfolio you have a tendency to want to get rid of the stocks which aren’t performing to your standards. Over-trading is a big mistake when building your portfolio. It is best to pick a stock from a company which you understand; this enables you to predict moves the company will make.
Too many stocks
Most amateur investors have a tendency to spread themselves thin by having too many investments without yielding return. It is better to pick a company which interests you most and invest in one stock. As your portfolio grows then you can make a decision to invest in another stock or two. Investing in too many stocks too early can lead frustration and excessive loss in your portfolio. Most stocks yield a return of 8%. Savvy investors understand how to invest their money with the company of their choice. Savvy investors understand how the economic conditions affects the outcome of the stock price. When you have multiple stocks in your portfolio in makes it tough to anticipate their response to the market.
Percentage over price
Savvy investors know the percentage is more important than the price of the stock. Example: Let’s say Company A stock costs $1 a share and Company B (popular company) costs $3 a share. Amateur investors would choose Company B because it is a popular company, while the savvy investor will choose Company A. The Breakdown: Lets say both companies stock price goes up $1. Company A now earned a 100% return on your investment, where Company B only earned you 33%. Under normal circumstances Company B is still a good investment because you beat the average rate of return at 8%, but in this situation Company A is the better choice.
Penny stock vs regular stocks
Savvy investors understand they have a better chance of earning greater returns on penny stock as opposed to regular stocks. Regular stocks usually take years before you start to reap the benefits of their portfolio. Penny stocks usually see great returns within the same year.
Investing is matter of research and more research. Research improves your chances of making a better investing decision which makes you a savvy investor. Good luck!