So you want to start investing. You’ve already read everything you need to know about the stock market, how to research stocks, and what you should buy first. Good for you!
Now that you’ve got your brokerage account set up and funded, you’re all set to go…right?
Before you put a single dime in a stock, fund, or bond, you need to know what to avoid. After all, there are a million scams to fall for, bad investments to make, and generally crappy choices when it comes to the stock market. That’s why we made this handy list of things you should never, ever do — unless you really like losing money.
Don’t listen to your friend’s hot tip.
If your friend tells you a “guaranteed” way to double your money on the stock market, they’re probably full of it. Even worse, they could be trying to scam you for their own financial gain. Take your investment advice from the experts and consider any/all alternatives before you put a single dime with a stock. (For more on your friend’s stock tips, read this.)
Don’t put all of your money in Bitcoin.
When Bitcoin increases in value, it does so at an incredible pace. Yet Bitcoin can and will decrease just as quickly. This is due to the high volatility of the cryptocurrency. So, if you put all of your money in Bitcoin and other cryptocurrencies, you could make a whole lot of money…or lose the bulk of your investment, all in a short period of time. (To learn more about why you shouldn’t go all-in with Bitcoin, read our Bitcoin primer.)
Don’t buy on the penny stock market.
The penny stock market, or over-the-counter (OTC) market, is just as volatile as Bitcoin. Stocks can go up relatively quickly, but they can crash just as hard. Since the OTC market isn’t regulated and there are plenty of scams, you can also lose all of your money in some cases. If you’re an expert investor and know what you’re doing, then (and only then) should you maybe try your hand at OTC stocks. If you’re new to investing and what to assume as little risk as possible, penny stocks should be a no-go.
Don’t keep all of your money in savings.
When you put money in your savings account, you won’t lose it — unless, of course, you make a withdrawal. Yet your savings account makes next to nothing in terms of interest, especially when compared to the potential gains on the stock market. Sure, there’s a bit of risk involved on the stock market, and your initial investment could decrease. Yet by investing in low-risk index funds, your money could grow more in a single day on the stock market than it ever would in your savings account.
Don’t use a fidget spinner to pick stocks.
While trendy and cute, leaving investment ideas up to a toy is not a good way to make serious financial decisions.
Don’t burn your money and forego the ways of a modern capitalist society.
Sure, capitalism can be pretty brutal and disenfranchises billions of people around the world. Yet it’s a brutal structure that every modern society follows. If you’re living somewhere and keeping the lights on, you’re enjoying everything capitalism has to offer. If you’re not growing your food, building your own home, and living a 100% sustainable life, then you’re playing by the rules of a money-driven society/economy. So, don’t burn your money as a statement. It’s only going to move back your retirement age. (Unless, of course, you’re burning money for an art project.)