About a million Canadians established trading accounts in the first half of the year 2020. This has been attributed to a lot of spare time on hand due to the lockdown restrictions imposed worldwide to curb the spread of coronavirus. However, the Investment Industry Regulatory Organization of Canada (IIROC) revealed a few danger bells that one should heed before investing independently.
What is IIROC?
IIROC is a finance regulatory body established in Canada which overlooks the 175 investment firms in Canada, including the big banks that offer opportunities for direct investment.
Lucy Becker, a member of IIROC, analyzed that it is entirely natural for people to gain from a bearish market and enter the field of investment; however, these novice investors are susceptible to incurring great losses. According to Becker, not all who invest privately are fated for doom. Many may succeed in their bet too. However, one should stay on high alert to avoid making grave financial mistakes.
Some common mistakes to avoid:
1. Investing in complex stocks
Becker advised against investing in complex stocks. Stocks that are very volatile and difficult to understand can jilt you halfway on the journey.
2. Amassing capital by borrowing from credit cards
One other general mistake made by many independent investors is of accumulating capital through loans. You might make a profit on your shares, but your profit could also be gobbled own in form of interest payments on your credit card or loan. This leaves you with nil in terms of actual gain.
3. High cost of managing funds
There is also a limited understanding of the cost of buying and purchasing shares. Buying and selling shares also break down your capital and thus novice investors should make informed decisions and avoid impulsive buying and selling.
Becker’s advice to independent investors is to deal only in the stocks they understand thoroughly well as to be able to track its market changes and thus the rise or fall in the subsequent price of a share. Additionally, he advises that whatever means one acquires to invest in stocks, one should remain vigilant about the related costs of investments and try to restrain them in order to protect the profits from getting wiped out.
