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The 7 most common beginner investor mistakes

What are some of the investor errors that are often made as a beginner?

There are some novice investor mistakes that become relevant from time to time. When stock prices fall significantly, many people turn their minds to take advantage of this opportunity. Buy cheap, sell more expensive.

Beginner investor mistake

After all, the collapse of the money and capital market is the dream of every investor, you can reap the benefits of the crisis. However, I can’t tell you to buy every stock that’s cheap. Even if the exchange rates are right down, but like everything worthwhile in life, investing is easier said than done.

I know there are many readers who are insecure and often emotions can play a part. There are those who can give an example, either personally or through an acquaintance, when someone has had to suffer a serious loss. That’s why this article now outlines the general possibilities of mistakes so you don’t experience them on your own skin. If you want to know what is most optimal for you personally, if it is optimal for you at all, ask for a callback in the contact menu.

Let’s look at the investor mistakes that beginners make most often:

1. You have no (adequate) emergency basis

It’s a little weird that an article about investing starts with a series of mistakes that the trouble is when you want to invest 🙂 Here, it’s not the intention that’s bad, but the implementation that slips out.
I have written about the emergency reserve and its importance before, so now I will only turn to it in a nutshell.
Be sure to have a spare behind you because it acts as a kind of safety net. By no means should you look primarily at what it bring you. The point is to be accessible. Even if you keep it in the piggy bank at home as you please.

Always keep your emergency reserve separate from long-term investments!

You need a liquid, ever-available emergency reserve because you never know when something unexpected will happen. Whoever promises anything, keep that money separate, don’t invest it in one place with other money in the hope of making any profit. This is because it will move with the others, and if their value decreases, dust can easily get in the machine.

If you look at the big world, you can see that the trouble usually doesn’t come alone. When many people lose their jobs due to a crisis, they should rely on this reserve. You could say no, you sell your long-term investments. Just when its exchange rate is down. So you are almost guaranteed to get out at a loss if you don’t have emergency reserves.

The last thing you ever want to do is to sell your long-term investment at a low price ahead of time in order to cover your daily expenses. And obviously you wouldn’t even want to get into debt for it.
The former would hurt you on both sides: on the one hand, if you sell below cost, you obviously didn’t generate either your own money or inflation, and on the other hand, you started a long-term solution because you’ll need it sometime later, so you can start this job as well from the beginning (already if you are able).

How much emergency fund do you need before you start investing?
Cover your 3-6 month full living from everything as if you had a complete and perfect 0 income at your current spending level. If you have a business, this can be a lifelong demand beyond half a year.

Once you have that, you can move on and make sure you don’t make the following investor mistake:

2. You don’t invest at all

It is considered a forgivable sin by many, but by the end of this point you will see that it is not so much against yourself.

The stock market can show significant volatility (exchange rate fluctuations) after a crisis, or just after bad news in a given area has spread. Because of this, many people may think that their money is the safest thing to do if they don’t invest a single penny. Instead, it is stored in some safe (supposed) location, such as at home or in a bank deposit. It is a fact that nothing else can provide greater mental security than a bank deposit, but it is only an illusion.

Look for a more profitable place for the part beyond the emergency reserve.
As mentioned in the previous point, you should always keep some of your money in a place where it is accessible at all times. You need a “buffer” that allows you not to have to sell your investments just to pay your bills. If, on the other hand, you keep all your money in cash, it practically predicts that you may face financial problems later, or you will have to work from scratch.

You can say you don’t understand it, the terrain isn’t for you, or you just got out at a loss before. This is all the lack of expertise that is relatively easy to make up for.
Just as you choose a dentist for yourself, you don’t run to the very first, and you don’t even try a drill in your own mouth, you also choose a financial advisor for yourself. This way you can get help to get started and at least protect against inflation.

This is how you can prevent inflation.

Due to the already mentioned inflation, uninvested money loses its purchasing power every year. With inflation at 3% a year, you will lose a little over half of your money over the next 20 years.

Inflation 1997-2019

From the beginning of the millennium to the present day, the average inflation rate reported by the Hungarian CSO was 4.3%. If you just add it up, we’re still above + 80%. But unfortunately this is a multiplication. Every year is compared to the previous one, so what you bought in 2000 for 10,000 HUF, you now get for 23,162 HUF. In retrospect, if you earned it that year but didn’t spend that $ 10,000, it’s like you’re earning $ 4,500 today.

Do you understand why you have to work your reserves above inflation?

Think about how you live now, where your life is now. What you are saying now is what you have the money for. Then let’s jump 20 years ahead, and now think about it, if you could buy the same things for twice as much, but you couldn’t or wouldn’t want to work anymore (so your income doesn’t follow that rise), what could you do?

The bank offers you the illusion of security, doing so without increasing the amount of money put (or deposited) in your bank account so much as to at least offset inflation. This is not that you are not standing still, you are moving backwards.

Is there a better way to avoid inflation?

First, raise money in addition to the emergency reserve, then invest the rest. Inflation is nothing but money deterioration. The only way to “escape” from it is to store your assets in non-cash or not in account money (say HUF). So it’s an investor mistake if you don’t invest at all.

Yes, I know a lot of emotion will come out then. When the markets fall or only the asset (even real estate) of your choice falls in value, it is not pleasant. But think coldly and know that option “B” is no better than that. No matter what you invest in (whether real estate, securities, or whatever), its price / exchange rate can be similar. If you simply leave your money in a bank account, then inflation will digest it.

I know the very first step is the hardest. It could have been scary even when the market was definitely going up, and now it can be even more so. But make a plan, do a little research, and jump into it. If you ask, we will help.

3. You are waiting too long to enter

This is most common in three cases:

  • you are waiting for the perfect enter point,
  • just wonder if you’re ready already
  • you still do not understand that this is for you (see previous point), so you are postponing.

Once you have your emergency base, you don’t need any further preparation. If you’re waiting to be “ready,” you’ll never start.
If you’re waiting for the “perfect entry point” to the market, it will never be in front of you (either not good yet or not good anymore). Theoretically, the best point to board in a crisis is the bottom of the crisis. But how do you know it’s the bottom? For no one knows that, until it starts going up. But then it’s too late.
Another issue is that if either fear or any other doubt is held you back by then, everything will be even more frightening in a market collapse.

So if you have your emergency reserve, you’re ready. Make a plan, designate a day, and get started, but stick to the principle of gradation. We can help you plan this, you can contact us here.

4. You not invest enough to cover your future financial needs

You’ve already gotten to the point where you have an emergency fund, you understand that the reserve will come in handy later, so you’ve stepped in to get going as well.

You don’t want to risk much, so you just taste a little bit. By doing so, you rock yourself into an illusion that you think you have an investment, so long-term issues are ticked out.
However, a tiny amount of money will result in a tiny amount for you.

There was a guideline at the time that

Capital = Money x Time

You can see that if you need a certain amount of capital, it will take a long time to bring together from a small amount. Regarding how much time it takes to double your investment depending on a given return, Rule 72 will give you quick help.

How much is it worth to set aside?

It is often said that at least 20% of your income should be the starting point. This, in turn, depends on what your goals are and when you want to achieve them.
How much this means to you specifically and what tool we are proposing can be easily seen in a face-to-face meeting. Ask for a call back so we can plan this with you.

The range of tools that are right for you also depends on your own willingness to take risks. To determine this, complete this test.

Determine your ability to take risks

By doing it right, you can also avoid the following typical errors:

5. You are investing too much money at once

Could you ask if this is already a problem? 🙂 It is not a serious trouble, but I think you should learn to walk before you start running.

We’ve seen a lot of it already when marketing tools have sold good-sounding solutions to people who have only heard of it that “it has produced a lot of returns so far”. (This sentence may have been true.) What did the customer do? Without further ado, he directed all his money here and then panicked at a low price at the very first market downturn.
At that time, the client’s portfolio was obviously not properly compiled, so risk management was not sufficient either.
You can read some testimonials about this in the article on investment security.

Why is it an investor’s mistake to invest too much money in a place unfamiliar to you compared to your own options?
The money market moves up and down in the short term (this is called volatility). It could easily happen that if you deposit HUF 1 million, in the next few weeks or months it will be “only” 800 thousand, and for a while HUF 1.2 million.
Take a look at this graph and you can see that the market is clearly going up in the long run, but there are significant fluctuations in the short run.

developed market equity funds

Put money here that you don’t have to touch for a long time in order to be able to manage your time freely.

As long as you’re a beginner, it’s a good idea to invest relatively little money at once, and rather always add it from time to time. Then you have the opportunity to get used to the feeling of volatility.
It feels completely different when you enter a new area with a small portion of your total wealth, as if you are worried about the whole thing. If you monitor the movement of a smaller portion of your total wealth in one place, and then, if you like, add more, it is completely different than when you enter an area unknown to you at the same time with all your wealth.
Start small and get used to the feeling. Then raise the amount.
If you invest too much, it can easily be shocked by a setback, and it can lead to you doing something stupid. (e.g. panic sale after an unexpected market crash)

It’s okay if you go step by step, the big ones do the same.
And if you get in as an advanced, you can still follow this point. We have many customers who could have redirected here their really lots of money at a time. Still, they decided to give it a try with a smaller portion. They liked the result and the service, so he brought in the rest of the money as well.
You might ask, wouldn’t it have been a better idea to bring them all over if he already liked them anyway? There were those who did. “Trials” are typically customers that a lot of people have already approached with a lot of things. So after the confidence and trust were built, it was a good idea, because then they could already see that we were talking about real things and they could sleep peacefully.

6. You are not focusing in the right place

It’s typically a novice investor’s mistake to look at just a single number or to read a single line. I’ve seen someone agribly praise a particular financial product for investing in a customer that is both safe and cheap for the product, so it’s a sure choice. That was really true. Another issue is that the yield was close to 0. So it was cheap, but pretty slowly it took the money rather than brought it.

What usually happens as an error is that it is not the value for money that comes into focus. A choice that works at a higher cost level may be able to achieve far much better results than a more frugal one.

Take the following example:

The following numbers are intentionally put here in a stomach-like style, just to make you understand the math. Or as they say, “Any coincidence with reality is the work of chance.” This is not the place to advertise. Math is real, we’ve seen more of it already, costs and exact returns are works of fantasy.

Annual cost Annual yield
Option “A” 0,1 % 2 %
Option “B” 0,1 % 20 %
Option “C” 10 % 20 %
Option “D” 10 % 2 %

If you count without inflation, you can still see that even with a fairly high cost level, “C” is a better choice for you than “A”. Why don’t I suggest “B” to you? Because it’s the marketing bait they’re just talking about, but mostly only exists for an extremely short time, no one has seen it across years. In contrast to the “D,” which we unfortunately come across regularly on existing contracts as well, when we talk to crying clients.

On the one hand, you can prevent this with a little outlook and knowledge of past yields. Although past returns are only indicative of any of your choices, guidance can be a good thing when it comes to your own money. As a matter of principle, keep in mind that usually low risk is associated with low return, high risk is associated with the possibility of high return.

7. An investor’s mistake if you haven’t decided how much you want to actively pursue your investment.

There are many ways you can invest. Each requires varying degrees of expertise, time spent, and regular personal decision making.
Whichever one you choose, I can’t say responsibly that there is possibility that brings you more and more money by transferring it once and then forget it. After all, in this case, we would distribute finite money infinitely.

There are those who prefer to keep things under control with either their own expertise or expert support. Obviously, we suggest a different direction for him than one who is only and exclusively interested in the end result. Most people either don’t feel like it or don’t have time to delve deeper into the money and capital market. If you determine this properly and honestly in advance, you won’t feel like you’re taking too much of your time.

If you have a restaurant, you can’t even say you’re selling a single type of food because it’s going to be good for everyone. After all, everyone has a different taste, and at some point, they may want just something different than usual. The same is true in the money market. Knowing personal preferences and personal “taste,” we can offer solutions.


  1. How do you protect against the effects of inflation?
  2. What is another foreign field in the world of investing for you, so does it happen that you are slipping into one of the above 7 mistakes?
  3. How can you avoid the above mistakes in your own life?

Feel free to contact us with any questions. You know, it’s cheaper to ask sooner than later.

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