7 Stock Market Investing Mistakes


investing in the stock market is really
not as complicated as it looks but I feel like a lot of the beginners out
there are making the exact same mistakes and these are mistakes that I’ve made
too when I was a beginner so I just want to clarify all of these mistakes so that
we can do a better job as beginners so in this video I’m going over the 7
biggest investing mistakes that beginners make in the stock market so
that you guys can avoid them and start off doing something a lot better now if
you just found this channel I’m Jason with honest finance and I make a lot of
videos on different topics that will give your life and your finances more
value so definitely subscribe if you’re into that type of content but for now
let’s just start talking about the beginner mistakes in the stock market
and before I get into everything I just want you guys to know that I am NOT a
professional trader by any means so just take this advice for entertainment
purposes only however it is my opinion and I do think it’ll help you if you’re
a beginner in the stock market okay so the first mistake that I see a lot of
beginner investors making is just the fact that they have got a lot of high
interest debt in their personal lives and then they’re investing on the side
and that is not something you want to do you do not want to have high interest
debt while you’re actually investing in the stock market I really have no
problem whatsoever if you want to invest like 200 bucks into the stock market
even if you have high interest at at home but the point is is that I don’t
want you investing more than that because if you’ve got a credit card that
has 18% interest you need to pay that sucker off before you start investing
any more money in the stock market and the reason this is a big mistake is
because if you look at the history of the S&P 500
it’s only averaged about 10 percent through all the years and then if your
credit card is 18 percent then that means that you’re just going to be
losing 8% more than what you can actually accomplish on the stock market
as an average so definitely don’t do that get your credit card paid off first
and then start investing your money in the stock market and also I know that
this contradicts itself but if you work for a company that offers a 401k match
then I would definitely take full advantage of it
because that is a 100 percent return on your money even if you have high
interest debt at home your retirement is so important for your future so please
make sure that you take care of your debts responsibly and if you do have a
401k match take full advantage of it because it is definitely worth doing so
so just remember to take care of all of your high interest debt first before you
start investing a lot of your money into the stock market that way the numbers
add up and you’re actually going to end up making money now the next big mistake
that I see a lot of beginner investors making is just the fact that they base
their moves on speculation news and then different forums and things that they
read on the internet and they base everything off a motion rather than
long-term strategy which is something that they’re just not doing you
definitely don’t want to be making a bunch of different moves emotionally
because of what someone else told you because if you have a strategy in place
you just need to stick with that stick with your gut and you’re gonna be a lot
better off and then a quick tip that I want to add is that you should always be
keeping long-term goals because you’re never gonna get that emotional if you’re
looking 5 to 10 years out versus what you’re seeing today tomorrow or next
week because those are all gonna be going up and down all the time
and if it’s 5 to 10 years out it’s just not that big of a deal when things
fluctuate quite a bit there’s also huge tax benefits for keeping your shares for
longer than a year because you’re gonna be taxed on what’s called long-term
capital gains so just keep that in mind I’m not gonna elaborate very much but if
you keep your shares longer than a year there are tax benefits for doing so
now the next mistake that I see a lot of us making is that a lot of the big
brokerages out there actually charge trading fees so if you’re gonna buy
shares or sell shares you have to pay a trading fee which is just a total waste
of money nowadays because there are a lot of brokerages that do not charge
trading fees I mean the free brokerages probably won’t have 24/7 call centers if
you ever run into an issue so as long as you’re ok with email and waiting a
couple days to get something solved then definitely go ahead and just stick with
the free brokerages because those free trades are definitely worth it all of
the free brokerages have their pros and cons but right now I definitely prefer
using weeble because they have the best signup bonus because if you sign up with
them you can get one free share just for signing up and that’s gonna be worth up
to 250 bucks and then if you deposit just a hundred bucks then you can get
another share that’s worth up to a thousand dollars so if you do that you
can actually get two free shares with them and that’s the best signup bonus
that I’ve seen for all of the 3 brokerage accounts now if you are
interested in signing up for Weibo I’ve got an affiliate link in the description
below which means I may be compensated if you
click through it but just keep in mind that this is definitely the best signup
bonus that I’ve found for all of the different three brokerages and I have
been using them for quite a while now and I really do like them and they have
a lot of robust features that the other apps don’t have and then also if you’re
the type of investor that wants to use a financial advisor that is totally fine
with me but just pay attention to the expense ratio because a lot of financial
advisors out there charge between about one and two percent which is a lot of
money if you have a lot of money in the stock market so just pay attention to
the expense ratio keep that as low as you possibly can and you’re gonna be a
lot better off with your financial advisor so just remember that there’s a
lot of brokerages out there that don’t charge any trading fees and then if you
are gonna use a financial advisor just make sure that the expense ratio is
super low now the next mistake that I see a lot of beginners making is that
they are not diversified which means that they just go big on just a few
different companies and then if anything goes wrong it seems like everything goes
wrong because they only have a few in their portfolio honestly it’s not that
bad of a strategy to just have a few companies that you’re invested with but
the problem is is when you’re a beginner you’re gonna be too emotional and so if
those stocks go up and down too much you’re just gonna make some moves that
you really don’t want to be making I’d recommend investing in ETF indexes like
the S&P 500 because that way you’re gonna have 500 different companies that
you can be looking after and if something goes wrong it’s probably not
gonna affect you that much and then once you have some ETFs then you can go ahead
and buy into some individual companies if you want to but at that point then
you’re gonna be diversified and if you guys have made it this far into the
video can you please comment down below and just say I got it that way I
actually know if I’m making sense about what I’m talking about
thank you very much now the next mistake I want to talk about is very simple and
that’s just the fact that you shouldn’t be investing in companies that you don’t
understand this is really important because I feel like the more you know
about a company the less likely you are to get super emotional if their shares
go up or down in the market and then that way you can actually stick to your
long term goals and it’s gonna be better for you in the long run and even if you
don’t understand a company very well it’s still a good idea to at least know
who they are because then you at least have a start of something that you
understand just a little bit I mean think of it like this without looking at
any data you could say that you know who Disney is and you could probably assume
that they’re a healthy company that’s only growing and so therefore just
because you know who they are that’s a much better start for something because
you at least know what they are what they’re about and probably where they’re
headed so just the fact that you already know who Disney is is a really good
start because you don’t want to just invest in some random gold mining
company out of Kansas just because it seems like a good investment
now the next mistake that I see a lot of beginners make is that they buy shares
of companies just because they feel cheap because they don’t cost very much
money but that doesn’t mean anything as far as whether it’s a good value or it’s
not a good value so for instance if you were looking into a company and their
shares were only $8 a piece that might sound like a good value because it’s
something that you can afford but the problem is is that there’s a lot of
different factors that go into the share price and it might actually be a
complete ripoff and you just don’t know it at that point because think of it
like this if you were gonna go buy a 20 ounce soda you generally know that those
cost about two to three dollars so if you went to Walmart and one of their
sodas was actually eight dollars you would instantly know that that was a
ripoff because you already knew that they’re supposed to be about two to
three dollars whenever you buy them so therefore in the stock market if you’re
buying an $8 share you need to understand what its true value is
supposed to be so that you can tell if it’s a ripoff or if it’s a good value
because the problem here is that all of us can afford an $8 soda but that
doesn’t mean that it’s actually a good value so just keep that in mind whenever
you’re shopping on the stock market so that you don’t buy something that’s
overvalued you actually want to buy it when it’s cheap and low and honestly the
easiest way that you can do this on different shares is just to check the
price history over like the last five to ten years and then that way you can see
if it’s high or if it’s low and that can give you a very basic idea of whether
you’re paying too much for the share or not and keep in mind that there’s a lot
of other factors that play into whether or not a share is a good value or not so
just keep in mind that there is a lot to do when it comes to researching a
company working on a very shallow point of view you can either check the p/e
ratio or their history like I just talked about so just keep in mind that
you want to buy low and sell high and that’s always something you can
definitely keep in mind and then the last mistake that I want to talk about
is the fact that a lot of investors will actually borrow money to invest in the
stock market with money the they don’t have so if you’re borrowing
money from your family or your friends to invest in the stock market that’s not
a good idea but I’m specifically talking about margin trading which is something
that you can do with brokerages where you can borrow money from them and then
you can pay them back at an interest rate to invest back into the stock
market there’s a lot of investors out there that use margin to their advantage
but the problem is is that if you’re a beginner you’re probably gonna be making
too many mistakes in the beginning and that is not something that you want to
be taking any risk for especially when you don’t have the money to lose and
then when it comes to your own budget I definitely want you only investing money
that you can afford to lose so when it comes to your family and things like
that make sure that you take care of your responsibilities first and then
invest after all of those are taken care of so just please understand that there
is risk when it comes to investing but I can promise you if you do it responsibly
and you stay away from a lot of these different types of mistakes you’re gonna
be better off in the long run and that’s the whole point of investing is that it
is long-term and that’s what you’re looking for you’re looking into the
future well hopefully you guys learn something from this video because once
again I’m Jason with honest finance and I make a lot of videos on different
topics that will give your life and your finances more value so definitely
subscribe if you guys are into that type of content but for now I’ll just leave
some more investing videos that you guys can watch or you can just move on with
your lives do whatever you want but thanks for watching

Dividend Investing Mistakes (Don't Fall For These Traps) 🛑



dividend investing can be quite a lucrative strategy over the long term providing you both capital appreciation and dividend income however when it comes to investing in these dividend stocks there are some very common mistakes I see especially with beginner investors but even with more advanced investors and I want to address those things today in this video hi guys this is a knowledge pact video so smash that like button sit back relax and let me know in the comment section down below if you have made any of these following mistakes I'm about to cover so the first dividend mistake that I've seen out there is that the starting yield is too low let me explain so like I said this is the most common mistake and it happens to the best of us out there when you're a brand intuitive investor you're looking through all these stars trying to pick one to invest in the first and probably the most important thing you're gonna be looking at is the starting yield on these stocks most investors from my experience wanna see a starting yield of around 3 percent or above to even consider investing in that stock for whatever reason that seems to be the sweet spot so that's we're gonna go with today what of ultimate is that if you find a stock and say the 1% ranging the high 1% typically investors will overlook that because the starting yield is just not good enough and this right here is a huge mistake because the starting yield is nowhere near as important as the compounded annual growth rate or CAGR for short the ceg are pretty much tells you how fast the company is growing their dividend year-over-year and this is extremely critical if you're planning to buy dividend stocks especially for the long term so now what I thought was we'll go through a real-world example here look at two real stocks that are creating right now in the stock market and we're going to compare them I'm gonna try to figure out which one is the better dividend stock so two companies that I'm gonna compare our Leggett and Platt on the left-hand side here and loads on the right hand side here Legum plot is currently at a starting yield of 4.1% with a CAGR of 4.1 4% lows on the other hand and starting yield of 1.8% and a cagr of 18 point 3 6 % clearly you can see that lowe's offers less than half the starting yield of like an implied so right away the first mistake a new dividend investor will make when looking at information is disregard low as a possible investment I mean who wants to have a dividend stock that pays less than two percent yield right well stick around because I'm going to show you right now exactly why you will want to invest in Lowe's in this situation versus Leggett and Platt keeping my from this information that Lowe's actually has a CAGR that is four times that of Leggett and Platt maybe they will grow their dividend much quicker on average so the best way to illustrate this is to compare a theoretical $10,000 investment and how it performs now after the first year no brainer here Leggett and Platt returns 415 dollars in dividends whereas Lowe's returns only 179 dollars in dividends so as you can see legged returns more than double the amount of dividends here then Lowe's now this is clearly a pretty drastic difference here when it comes to dividend yields but after only one year the chdr benefit hasn't kicked in yet so let's move on to the next metric here after three years like it yields you around for $68 vs. Lowe's $295 and now all of a sudden you can see has a gap is starting to close down like it isn't yielding double the returns anymore when compared to Lowe's after five years this gap has closed down even more with Leggett yielding 508 dollars and lower yielding four hundred thirteen dollars so we're getting very close to equal pay out here after just five years now after seven years this is where the magic of chg are in Leggett is now yielding us five hundred fifty one dollars and Louis is yielding us five hundred and seventy nine dollars so in this situation after seven years Lowe's is now yielding us more dividend income and from this point on it's pretty much low that's a clear winner here as you can imagine the growth plate just keeps snowballing and compounding ten years the difference is now about $340 in favor of Lowe's after 15 years it's a massive difference with Leggett at a measly seven hundred sixty two dollars and lows at two thousand two hundred and thirty two dollars and then if you hold this for even longer 20 years you see Lowe's yields you over five thousand dollars a year and 30 years it yields you almost 28,000 dollars in dividends every single year now of course this information is hypothetical I did use real-world examples of the prices the yield and the growth rate but when you're looking at a stock over 30 years to such a high dividend growth compounded rate is pretty unlikely that doesn't mean it is impossible for those to continue growing at 18 percent clip your over your for the next 20 years but what I'm saying is that it is unlikely it's always set my expectations with that in mind but what I didn't want to drill through in this video with this comparison here is that it's very important to consider the component annual growth rate the CH er when it comes to dividend investing after looking at information it's very clear the CAGR is more important than the starting yield however there is an exception if you do plan to hold a stock only for the short term say only for one or two years then clearly Leggett and Platt for this example would have been the better choice because they're not really taking advantage of that long-term compounding effect and that's completely fine because everyone has different incentives different strategies different goals and if this meets your goal if you want to hold me hold the stock for a couple of years clearly you want to look more at the starting yield as opposed to the growth rate but when it comes to dividend growth investing anyone invest over the long term it's clear here that the cagr is more important than restarting yield now moving on the second dividend investing mistake that I want to cover here is that investors look for high yields when it comes to dividends more specifically I see more often than not people looking for starting yields that are well over ten percent and the only investment stocks that pay out over at ten percent yield and as we saw in the previous example here is this kind of related to that but you can see that over the long term you can have your yield on cost to be over ten percent from your initial investment but to find a stock a proper blue chip company that's stable secure and growing the dividend year-over-year how we starting yield of over 10 percent to begin with is extremely rare and if it does happen there are some things to watch out for so REITs are actually a very common investing vehicle here where people go in and purchase these reads because they payout by law ninety percent of their income which typically means that these reads payout over a ten percent yield however during tough economic times these reads most likely will slash their dividend and as a result will most likely have a negative effect on your investment and what's worse is that these type of companies are also more likely to go bankrupt any recession if times get really tough so it's also something to consider because you could potentially lose your principal investment as well our pros are consider reads pretty high risk investments and I personally would not allocate a very large portion of my portfolio to them now that doesn't mean that you shouldn't invest in REITs at all I'm not a financial adviser I'm not telling you what you should and shouldn't do but it does make sense sometimes to diversify yourself a bit if you don't have any exposure to real estate now if you are investing in high dividend stocks that are not REITs you should definitely familiarize yourself with something called a payout ratio and all this does really is it tells you how much a company is paying out in dividends compared to their earnings ideally you want this number to be as low as possible because that does signify the dividend is a lot more sustainable and the dividend is safe from getting cut anytime soon if this number is high for me anything above 70% will be considered high then I would be cautious that this company could scale back their dividend or not grow their dividend in the near future until a payout ratio is closer to maybe a 60 or 50 percent you can typically find this payout ratio figure on most website that give you information on stocks for example here you can see seeking alpha if you look at the top there you can go to the dividends tab and you can see that the payout ratio is pretty much right here in the middle and it tells you exactly what percentage of companies paying out any dividends so regardless of your investment whether it's a high yield or a low yield this is always something to consider and always something to make note of so you don't fall into this mistake now the third mistake I want to talk about is something that I believe anyone can fall crop to and it doesn't matter if you're a seasoned investor or a brand new investor someone who's been in the markets for years it really comes down to valuations more specifically the mistake I see is that people ignore company fundamentals now although this mistake isn't quite as bad as the first two especially over the longer term it is still a mistake that I see happen and it will still impact your gains remember when you're buying a stock any stock a dividend stock non dividend stock doesn't matter you're buying into a company that sells something with about the service or a product to generate income and profits and we look compañía see if it's a good investment you want to look at something called a p/e ratio of price to earnings ratio and this figure will pretty much give you an idea of if this company is undervalued fairly valued or overvalued and like I said this goes for any investment and any stuff out there now at any given point in time in the stock market whether we're at stock market lows or stock market highs there are certain sectors and stocks that are typically on sale and that provide excellent value because when you look at the valuations take the time – and research the company you'll see that the company is fairly undervalued for example right now and I've created this video to companies that are undervalued in my opinion will be one from the industrial sector of 3m and one from the syn stock sector Altria I personally think if the market is under valuing these companies right now and when you combine it with the dividend history that these companies have with a different growth dividend payout sustainability and all the other metrics that I consider when looking at an investment these look like a very strong companies to hold over the long term to take advantage is not only up their dividend growth but also with capital appreciation but the mistake I see is that there's a lot of investors out there that just blindly buy companies just because of the name of the company because it's a popular stock right now and they don't really consider or care about the valuation of this company a good example would be Microsoft right now you can see if I looking at their metrics they look pretty good payout ratio is fairly low five-year compound annual growth rate is high and they've been growing dividend for 16 consecutive years all three things that he'll actually make me very interested in investing in this stock when you look closer in my opinion Microsoft is incredibly overvalued currently their PE and for PE are both above 830 where the sector average is closer to 20 so you're paying a pretty high premium here for this company so when I consider Microsoft a great dividend growth stock yes I would would I consider Microsoft stock on sale currently absolutely not and what I personally by Microsoft adds these current prices I don't think so just because it's a good business just because it has good growth ahead of it and just because growing their dividend does not necessarily mean I'm gonna go buy this company blindly I still have other metrics that I look at like I discussed in this video and right now I believe Microsoft is potentially overvalued now this is something that comes with time and research a lot of time and research and it's my personal way of investing in stocks not everyone is gonna agree with this but that's completely fine because there's many investing strategies out there and you should stick to one that works for you like I said there are other great dividend growth stocks out there that are on sale right now in my opinion like 3m and Altria so those are stocks that I would prefer to put my money into right now as opposed to stocks like Microsoft just remember that the market is inefficient there are always deals out there and it's up to you to find those deals and not just blindly invest into the market because more often than not those massive stacks of wealth that you're after is typically done with a lot of work and a lot of research behind it I personally would not blindly invest in a dividend stock or any stock for that matter without first looking at their fundamentals okay this is actually one of my favorite videos to make because it gave me a chance to inform you better on dividend stocks and mistakes that I personally have gone through with dividend investing and that I see a lot of you going through dividend investing as well if you appreciate this content all you have to do is hit that like button and hit that subscribe button down below if you're brand new to the channel and also guys remember if you want to know what tools I use for example for stop researching kind of find out where company is valuations analyst all that kind of stuff my go-to choice is tip ranks that's temperance calm I have a link description below with a promo code if you want to sign up for it 20% off using positive 2019 sign up for that you have a 30 day money back guarantee if you don't like the service but in my opinion it's actually one of the better services out there when it comes to stock research so guys let me know a dividend investing mistakes you've made over the years comment it down below and I'll make sure to reply to every single comment down there thank you so much for watching don't forget your best positive ELC attacks