Opinion – Grain in Grain: The 3 most frequent mistakes of novice stock investors

The selection of the best investments in risky assets is not a simple task anywhere in the world. In Brazil, with the interest rates we have and the intense volatility, this task becomes even more arduous. In arid terrain, it is easy to make mistakes and beginners end up being the first to make mistakes.

Possibly, you have already heard that most active equity funds lose the Ibovespa.

Many investors, not understanding the reasons for this statistic, think they have the solution that those who tried and failed.

I have been a manager of equity and hedge funds for many years. I can say with knowledge: if you are going to start alone, it is more likely that you will have a worse result than those managers who lost the Ibovespa.

I don’t mean you shouldn’t try. However, don’t make the three mistakes below that most newbies make.

The first common mistake that beginners make is looking for tips on social media about what the action is right now. Be very careful with this attitude.

Reflect on the following questions.

Do you agree that finding a poorly priced asset is difficult? Usually activities that demand work and can generate great results should be well paid, right? So how could people be giving all this away for free on the internet?

Several times, this buzz about a stock is a ruse, which those who have already made money with it, do to attract investors and, thus, get volume to sell to the unwary.

The second most common mistake beginners make in stocks is not knowing how to sell.

If you think knowing when to buy is difficult, you will find selling is even worse.

In this case, investors err because they either don’t sell after the stock has already gone up, or they stay with a stock at a loss for longer than they should.

Holding a losing position, waiting for its return to the buy price, can be the worst course of action.

The moment to sell is not defined by the price you paid, but by the potential that the asset presents from the current moment.

Finally, the third most common mistake is trying to do everything yourself.

If experienced teams of managers already make mistakes often, how likely are you to make even more mistakes when alone?

If you don’t know what to buy, try starting by following the stock portfolio of a brokerage firm, research firm or fund manager you trust.

Seek help to guide you in this beginning.

Even Warren Buffett started his career following more experienced professionals. In the beginning, Buffett worked for Benjamin Graham, from whom he learned the teachings he implemented in the following years.

Also, even after more experience and to this day, Buffett is not alone. He has a team.

If one of the most recognized investors in the world has a team and got help early on, why shouldn’t you too?

Michael Viriato is an investment advisor and founding partner of Investor’s House

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