Photo by mr.bmonroe

How many of you have never made a mistake in your life?

Not once?

Few of us can say that we don’t make mistakes at all and reading Musicwhiz’s post here got me thinking about the role experience teaches us about ourselves and how to conduct our lives better with regards to our journey towards financial freedom.

Making mistakes are part and parcel of the human condition.

In my journey towards financial freedom, I’ve made more than my fair share of mistakes. Here are some that I would like to share with everyone today.

Confusing investments and speculative punts

The thin red line between investing and speculating lies in the mind and motives of the investor. There is nothing wrong about investing for the long-term or speculating on the short-term. Bad things happen when the two are confused.

My own investment mistakes have been not knowing why I was buying a stock at that price when I clicked on the buy or submit button for the order through my share trading platform.

I realise from losing money on speculative punts turned into long-term holdings and over-eager sales of solid counters when I didn’t need the liquidity that it’s important to know your motivation before you buy or sell.

This is because your the subsequent approach to monitoring your purchase depends on your motive. If you are in it for the long-term, you should do some research about the prospects and financials of the company before you come up with your target price to buy and hold. This requires you to do more work before you buy. After you buy, you put it aside and don’t monitor the daily movements are you are more interested in the long-term growth of the company.

Speculative punts are bets. They typically fare better when there is volatility in the market and you have to watch the counter very closely to take advantage of major moves at opening, closing and throughout news that can potentially affect the price of your punt. You need to also consider cut-loss and take-profit levels.

This means you need to watch the screen and have an idea on the short-term trend of the market.

It’s very different from investing for the long-run and it can give a gambler’s high when you make the profitable trades in a very short-term that beat returns of 0.75% per annum from Maybank iSavvy savings account. Read more…