Five Mistakes Made By Newbie Stock Investors, Part One: They Buy After The Price Rises

Mistake #1: They buy stocks after the price rises. If the name of the stock investing game is to buy low and sell high, than the single biggest mistake made by newbie investors is buying at a higher price.

You see, the money you make from investing is made when you buy, not when you sell. Smart investors figure out what the investment is worth well in advance - i.e. before they buy. Then, the make sure they buy at a price less than what it’s worth.

This idea of buying at a price less than the stock’s “intrinsic value” guarantees you a profit. It’s like buying a car for half of the sticker price, except a stock can actually help grow your net worth.

Example: I shared a stock pick with a friend last year. I was ecstatic about this particular stock. The friend took note, but did not actually buy the stock when I did.

A few months later, after some movements and gains of more than 300% on this pick, I began selling off a portion of my position to lock in the gains and cash out my original investment capital.

I almost fell out of my chair when, completely out of the blue, my friend said, “I just bought some shares of the stock at price X - what do you think?”