Welcome back. Over the last several weeks here, we’ve learned quite a lot about the stock market, as well as many alternate methods of investing. However, this knowledge is only as useful as your ability to put it to practical use, successfully.
Therefore, we’re going to spend the next few entries in this blog taking a look at some of the worst and most common mistakes that people make when dealing with Stock Market Investing.
It’s our hope that by doing this, we’ll better prepare you to be able to avoid these mistakes, so that your investments will remain secure and profitable.
Don’t Ignore What Drives The Market
Firs of all, we’re going to discuss the error of ignoring the forces that drive the market in favor of pure analytics. You might recall quite some time ago in this blog that we talked about the different ways to value a stock.
One of the most highly recommended methods, of course, was the quantitative analysis, where you take note of what assets a company has to prepare it for upwards movement in the near future.
Investigate The Market As A Whole
However, it’s possible to focus too much on quantitative analysis. You must also do some qualitative research to find out what forces are at work in the market itself (not just the company you’re thinking about investing in) that might help or hinder that company’s movement.
Try to look for things like any future acquisitions that the company has their eye on, or new products in their lineup that are about to be launched. Any new policies that the company plans on enacting are worth looking at as well because these can have a real impact upon the bottom line.
The main point is – you can’t just look at the company you’re investing in, you also have to look at the conditions of the market as a whole, and what that company is doing to adapt to them.
See you next week for part 2 of Stock Market Investing mistakes.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2009
{ 3 comments… read them below or add one }
I suppose that if quantative analysis was all that was needed, people wouldn’t lose – unless their maths were wrong.
This analysis cannot take into account the’ emotional’ aspects that affect stocks – BP is a good example at the moment – stocks well down because of the reaction to their oil spill and the way they have handled it.
Also, events like fears that the economic recovery may not be as strong as first thought – or Greece’s troubles having an impact on the market.
Hi Sean,
I often see in the news that the stock market is up or down depending what has happened around the world that day. It seems to me that you need a balance when you’re doing your research.
You need to look at what has happened historically with the company’s stock, consider where it’s going to go and evaluate what the market itself is doing. I don’t know but that’s a beginner’s perspective.
I think this is sound advice you are giving here. We must investigate the market as a whole in order to get an overall picture of what is happening in the macrocosm and microcosm.
What the company is doing towards its own growth and how it is adapting to market trends is something I always look at when I read a company’s news reports. It is amazing what can go on inside a company, even personal events of some of the executives can make a stock price fall. It can be that seemingly insignificant but has a major impact.