Easily Avoidable Stock Market and Investing Mistakes

by Chris Ryerson

If you are like many millions of Americans investing in the stock market sounds scary and comes with a lot of reservations. This is natural and as it should be since the stock market can be very risky. However by follow some simple steps, taking it slow and making deliberate moves you can mitigate many of the risks involved with stock market investing. This does not mean you will never lose money because you will however, by following these guidelines you can ensure that in the end you will come out profitable.

If you are just getting started with investing then one of the easist ways to get up and running and typically the safest is to get a stockbroker. Later you will want to do away with a stockbroker and save on the fees and have more control. However when starting out a stockbroker can be very useful in getting you familiar with how the stock market works and how to begin trading. It can also be very helpful to find a trusted friend that invests and use them to bounce ideas off of and discuss the process with. Once you get some basic level experience you will want to strike out on your own and go for it making your own decisions etc. However, when you first get started having advice and someone to show you the ropes can really help.

One of the worst stock moves you can make is with variable annuities using the premium of your insurance. A variable annuity is an insurance contract that allows you to invest your premium in mutual fund-like investments. This sounds good in paper, but if you look at it a little harder, you’ll find that they are bad investments in the long run for the following reason:

Some other things that you want to watch out for and be carefully when considering investing follow.

Tax cuts Ordinary investments in stocks and mutual funds qualify for low capital gains treatments, thus smaller taxes. Your gains from investing your premium, on the other hand, get taxed as income as soon as you withdraw the money.

Early withdrawal penalties Insurance plans are designed for retirement. Taking out money from your premium entails a certain amount of penalty from both the insurance company as well as the government. So if you withdraw your profits, you will be penalized.

Death benefit If your stocks are down upon your death, your beneficiaries can get as much as the investments you put in. Unfortunately, if your stocks are up, they get taxed as a regular income.

Costs Annuities with insurance features are actually more expensive than ordinary mutual funds. The more insurance features your annuity has, the more annual feels are heaped against it, which naturally eats up your profits.

Timming There are specific times as well, when to and when to not make an investment. For example times of natural calamity may drive prices of stocks down but there are no insurance these would recover to make a good profit.

As always investing in anything has some risks involved and there are times that you might lose money. The important thing is to remember the points above, start slowly and as long as you are earning money more then you are losing stay with it. It can take a lot of time to learn the ups and downs of the market.

Author`s note:
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Published under category : Stock Trading