10 Common Mistakes to Avoid in Stock Trading

The following list of 10 typical stock trading blunders is exclusive to the Philippine market:

Lack of Research Error:

Buying stocks with adequate research is a frequent error. Many Filipino investors need to learn the basics of the companies they invest in; instead, they rely on advice from friends, family, or social media.

Solution: Conduct an in-depth investigation. Examine the company’s management, position in the industry, financial standing, and plans for the future. Use materials such as market research reports, financial news, and the website of the Philippine Stock Exchange (PSE).

Emotional Investing Error:

Emotional investing, motivated by avarice or fear, can result in wrong choices. Without considering long-term objectives, Filipino investors may panic sell during market downturns or overbuy during bullish times.

Solution: Create and adhere to a disciplined investment plan. Determine your entry and exit points in advance based on your risk tolerance and financial objectives. Remain patient and refrain from acting on impulse.

Overtrading Error:

Buying and selling stocks frequently might result in expensive transaction fees and poorer total profits. Some Filipino traders overtrade because the thrill of the market fuels them.

Solution: Take a long-term outlook. Pay more attention to the caliber of investments than the volume of transactions. Keep a close eye on your portfolio, but refrain from trading too much.

Ignoring Diversification Error:

Investing your money in a single stock or industry can put you at serious risk. For example, if the property market slumps, making significant investments in the real estate sector may be risky.

Solution: Spread out the assets in your portfolio throughout several industries and asset types. Incorporate a blend of growth and value equities and consider alternative investing options such as mutual funds or bonds to distribute risk.

Chasing High Returns Error:

Buying equities based on historical solid performance might be deceptive. To make more gains, some Filipino investors may purchase equities that have recently surged in value.

Solution: Assess whether large returns can be sustained. Seek out businesses with solid core values and reliable performance. Recall that past performance does not guarantee future success.

Ignoring Risk Management Error:

Not implementing risk management techniques might result in significant losses. Many Filipino investors may not diversify enough or utilize stop-loss orders to reduce risk.

Solution: Review your portfolio’s risk exposure regularly and set stop-loss orders to limit possible losses. Make sure the investments you make fit your financial goals and risk tolerance.

Ignoring Market Factors Error:

Neglecting larger market and economic factors can impact investment results. Filipino investors occasionally overlook the impact of variables such as interest rates, inflation, and political stability on the market.

Remedy: Keep up with the regional and international economic landscape. Keep up with the latest information from the BSP and other pertinent economic statistics. Take these observations into account while adjusting your investment plan.

Herd Mentality/Following the Crowd:

Herd mentality/following the crowd might result in less-than-ideal financial choices. Several Filipino investors may purchase well-known stocks without conducting their research.

Create your investment thesis as a solution. Conduct your study to make decisions based on solid analysis rather than marketing hype. Trust your analysis and study to help you make wise investment decisions.

Ignoring Financial Objectives Error:

Investing without well-defined financial objectives might result in aimless trading and erratic profits. Filipino investors may not have a defined investment goal in mind.

Solution: Identify your financial objectives, including long-term ones like retirement planning and short-term ones like saving for a big purchase. Match your investing approach to these objectives, and evaluate your results regularly.

Underestimating Costs Error:

Underestimating the impact of transaction costs, taxes, and fees can negatively impact investment returns. Filipino investors can ignore how these expenses impact their total profitability.

Solution: Recognize all of the expenses related to trading, such as taxes and brokerage fees. Consider these when making investment selections, and try to cut back on needless spending.

A multi-award-winning blogger and advocate for OFWs and investment literacy; recipient of the Mass Media Advocacy Award, Philippine Expat Blog Award, and Most Outstanding Balikbayan Award. Her first book, The Global Filipino Bloggers OFW Edition, was launched at the Philippine Embassy in Kuwait. A certified Registered Financial Planner of the Philippines specializing in the Stock Market. A recognized author of the National Book Development Board of the Philippines. Co-founder of Teachers Specialist Organization in Kuwait (TSOK) and Filipino Bloggers in Kuwait (FBK). An international member of writing and poetry. Published more than 10 books.  Read more: About DiaryNiGracia